Shares of Bed Bath & Beyond (NASDAQ:BBBY) are surging higher by more than 60% on an apparent short squeeze. This is great news for Ryan Cohen’s RC Ventures, as a regulatory filing on Monday showed that the fund had purchased 1.67 million call options on BBBY stock. Cohen’s options consist of 1.12 million $60 strike calls; 44,400 $75 strike calls; and 500,000 $80 strike calls. All of the options expire on January 2023. Last March, RC disclosed that it had purchased a nearly 10% stake in the embattled retailer. According to FactSet, the position amounted to an 11.82% stake as of late March. According to the most recent filing, RC still owns 7.78 million common shares of BBBY as of April 21.
Cohen’s purchase stands in stark contrast with asset management firm FMR. In a filing received earlier this month, the firm disclosed that it had sold off 99.99% of its BBBY stake, missing out on significant gains in the process.
As of July 31, 29.07 million shares of BBBY stock were sold short. That amounts to a massive short interest as a percentage of float of 47.2%, which would take 2.3 days to fully cover. As a result, it seems that a short squeeze is taking place today.
After acquiring a stake in BBBY in March, Cohen penned a letter to the company’s board. Let’s get into the details.
Ryan Cohen Purchases BBBY Stock Call Options
In the letter, Cohen criticized former CEO Mark Tritton’s leadership and outsized compensation. He pointed out that since Tritton took over as CEO, BBBY underperformed the S&P Retail Select Industry Index by 58%. Cohen also pushed for changes to the company’s board. His comments were well received, as Bed Bath & Beyond added three new members to the board that were approved by Cohen. In June, Tritton was replaced by Sue Gove as the new interim CEO.
Cohen also pushed for a sale or spinoff of the buybuy BABY brand. Using estimates of $1.5 billion in sales by 2023 and a “double-digit growth profile,” Cohen rationalized that the brand itself was more valuable than Bed Bath & Beyond. In turn, it could use the proceeds to pay off debt or repurchase shares.
Shaking things up even further, Cohen suggested that Bed Bath should sell itself to a “well-capitalized” acquirer. He noted that public markets are not giving BBBY enough value, so a sale could provide a premium to shareholders and unlock the company’s true value.
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.