A stupendous rally at Bed Bath & Beyond Inc.
stocks tumbled last week when one of the company’s biggest shareholders cashed out.
Now, a multitude of individual investors say they hope to get over the worst of the sell-off.
Even as Bed Bath & Beyond tumbled Friday into its worst one-day pullback ever, individual investors continued to cheer the stock on social media platforms such as Reddit, Discord and Twitter..
Many posted diamond and hand emojis – internet shorthand for someone holding onto their investments even as there is mounting pressure to sell. Others tagged their posts with “HODL”: wait for dear life.
Your message to the world? We are not giving up.
Wil Lobach, a 39-year-old investor from New Jersey, said he hopes to use the sale as a way to increase his stakes in Bed Bath & Beyond.
He owns more than 250 shares of the distressed retailer. After having bought them at an average price of about $6.50, he is still about 70% above his initial investment. Bed Bath & Beyond shares fell 41% on Friday to $11.03.
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Lobach said last week’s stock volatility did little to scare him. He also owns stakes in GameStop Corp meme stocks..
and AMC Entertainment Holdings Inc..
both also known for their wild swings.
“I’m proud of him,” Lobach said of billionaire investor Ryan Cohen, whose sale of his stake triggered the sale of Bed Bath & Beyond shares last week.
“Cohen’s army is right behind him,” added Lobach, noting that he supports the sale and believes Cohen is not done with Bed Bath & Beyond. “It has been amazing to be a part of this moment in history.”
Cohen, co-founder of pet retailer Chewy Inc..
, has developed a dedicated following of individual investors, who have celebrated his rapid rise last year from activist investor to GameStop president. Many people piled up shares in Bed Bath & Beyond after he revealed a sizable stake in the company in March and issued a letter to the board pushing for big changes.
David Simpson, a 30-year-old from Seattle, said he is committed to holding onto his Bed Bath & Beyond investment until at least 2023, when he believes the stock will have risen to around $200.
He was not deterred by the news of Cohen selling his stake. In fact, he says his conviction in his Bed Bath & Beyond business has only gotten stronger. He mentioned Cohen’s role in growing Chewy from a small startup to a company that would later be acquired by PetSmart for $3.35 billion, a deal that was at the time the biggest e-commerce acquisition of all time.
“My instincts tell me the same is true” for Bed Bath & Beyond, Simpson said, adding that he believed the company could strengthen its financial position by the end of the year.
Bed Bath & Beyond is seeking a $375 million loan to build money and help pay off debt, the Wall Street Journal previously reported. In June, the company said sales for the current quarter were down 20% from the year-ago period.
The determination of individual investors is the latest twist in a stock meme craze that has lasted far longer than many professional investors and analysts could ever have predicted. Some individual investors say they have good reason to believe stocks will rise again.
Many also continue to expect what they believe is a massive short squeeze, a phenomenon that occurs when a stock rallies so much that investors who bet against it are forced to buy back shares, pushing the stock even higher.
At the moment, those who bet on the action face an uphill battle.
On Friday, the Bed Bath & Beyond sell-off spread to other meme stocks, with GameStop losing 3.8%, AMC Entertainment down 6.6% and Coinbase Global Inc..
drop of 11%. The S&P 500 closed down 1.3%.
The data also shows that pressure from short sellers continued to build.
Roughly half of Bed Bath & Beyond shares that were available for trading as of Friday afternoon were selling, according to Ihor Dusaniwsky, head of predictive analytics at S3 Partners, a technology and data analytics company.
“This has been a roller coaster week,” Dusaniwsky said in an email, noting that the value of short sellers’ positions dropped hundreds of millions of dollars in the first half of the week, only to jump hundreds of millions of dollars. on the fifth and sixth.
Wall Street analysts are also warning that there could be more pain ahead for shareholders.
Wedbush Securities analyst Seth Basham said he believed Bed Bath & Beyond shares should be trading around $5 – 55% below where they closed on Friday. He cut his rating for the stock to “underperforming” from “neutral” in a note after Cohen made his plans to sell his stake on Wednesday.
Even if the company manages to achieve goals like fixing its inventories and supply chain problems, its shares have soared that the risk-reward ratio for investors remains “disproportionately tilted to the downside,” Basham added.
Bed Bath & Beyond shares are still up 122% in the quarter, compared with the S&P 500, which is up 12%.
Wells Fargo analyst Zachary Fadem, who covers Bed Bath & Beyond, is maintaining a $3 price target for the stock – 73% below where it closed on Friday.
Among Fadem’s concerns: Foot traffic at Bed Bath & Beyond stores and web traffic on its website appear to be slowing. The company is also in a financially vulnerable position. It is working with external consultants to try to strengthen its balance sheet.
“We believe that BBBY’s actions are once again dissociated from economic reality,” Fadem said in a note.
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