Bed Bath & Beyond (NASDAQ:BBBY) is having quite a day. Shares of the retailer soared over 85% higher in the premarket and are currently up over 40%. This price action can be explained by GameStop (NYSE:GME) chairman Ryan Cohen disclosing that he owns a 9.8% stake of BBBY stock through his fund, RC Ventures. The fund’s stake makes it a top-five holder of Bed Bath & Beyond.
Yesterday, Cohen also penned a letter to Bed Bath & Beyond’s board. In the letter, the activist investor urged the board to spin off BuyBuy Baby and to “Evaluate a Full Sale to a Well-Capitalized Acquirer.”
Here’s what else investors should know moving forward.
BBBY Stock: Who Is Ryan Cohen?
Ryan Cohen is best-known for cofounding Chewy (NYSE:CHWY) back in 2011 at the age of 25. Last year, though, he gained further notoriety when he joined GameStop’s board, later becoming chairman. Now, it seems the activist investor may have his sights set on turning around Bed Bath & Beyond.
In his letter, Cohen acknowledged the company’s “brand and capital allocation policy.” However, Cohen also raised several concerns about Bed Bath & Beyond’s management and growth initiatives. He also highlighted that the company has underperformed the S&P Retail Select Industry Index and company peers since CEO Mark Tritton joined in 2019. The letter detailed how Tritton’s pay over the last two years has exceeded the pay of CEOs of several other large retailers, including Dollar Tree (NASDAQ:DLTR) and Macy’s (NYSE:M).
Finally, Cohen urged the board to explore the full sale of Bed Bath & Beyond and a spinoff of its BuyBuy Baby chain. The GameStop chairman believes that a sale of the company would be in the best interest of shareholders. BBBY stock has faced “a difficult existence in the public market.”
On the other hand, Cohen believes the market is not properly valuing BuyBuy Baby. With revenue expected to reach $1.5 billion in fiscal 2023, Cohen estimated that it is already worth more than the entire Bed Bath & Beyond business. As such, a spinoff or sale of the entity could help Bed Bath & Beyond “pay off debt, put cash on the balance sheet and continue reducing its share count.”
What Is RC Ventures?
RC Ventures operates as a “seed and venture capital firm” that works to invest in early-stage companies with high growth potential. While BBBY isn’t an early-stage company, it can be implied that RC believes it has a chance for high future growth.
According to the fund, RC strives to help entrepreneurs unlock potential by providing them with “capital, network, and mentorship.” The activist investment group’s current portfolio includes a variety of names in different industries, such as Truck Lagbe, Tuk and Kludio.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
