Shares of Bed Bath and Beyond (NASDAQ:BBBY) are down by more than 20% after Ryan Cohen’s RC Ventures filed a Form 144 with the intention of selling its entire stake. A Form 144 must be filed to the Securities and Exchange Commission (SEC) when an affiliate of the company plans to sell more than 5,000 shares or $50,000 worth of stock. In addition, the form must be used when a sale isn’t registered, such as through a prearranged 10b5-1 trading plan.
The filing of the form allows Cohen to sell his stake within the next 90 days. It does not obligate him to sell his stake, although according to the Securities and Exchange Commission (SEC), he “must have a bona fide intention to sell the securities referred to in the Form within a reasonable time after the filing of the Form.”
On Aug. 15, Cohen disclosed an 11.8% stake in the retail company. The stake consists of out-of-the-money call options against 1.67 million shares of BBBY stock and 7.78 million common shares. Furthermore, the call options all expire in January 2023 and have strike prices between $60 and $80. In March, Cohen disclosed a 9.8% stake and sent a letter to Bed Bath’s board. The letter called for strategic changes, such as the replacement of former CEO Mark Tritton and a sale or spinoff of the Buy Buy Baby brand.
Ryan Cohen Discloses Intent to Sell BBBY Stock
Between Monday and Wednesday’s close, shares of BBBY gained close to 50%. So, why exactly is Cohen selling his stake?
It’s not a secret that Bed Bath’s business has declined in recent years. During the first quarter, the company reported a net loss of $358 million, while same-store sales declined by 24% year-over-year (YOY). Meanwhile, online sales fell by 21% YOY, while inventory rose by 15%. Cash on hand is a major problem as well. As of Q1, the company had about $200 million of cash, cash equivalents, restricted cash and investments on hand, less than the Q1 loss it reported.
Basically, Cohen stands to make a major gain on a failing business that was pumped up by speculative investors.
After Cohen’s stake was disclosed after the market close on Aug. 15, shares of BBBY closed higher by 30% on Aug. 16. This was a result of meme stock traders swarming in to get a piece of the Cohen-owned company. Now, it appears Cohen is using these same traders as exit liquidity.
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.