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GameStop’s chairman, Ryan Cohen, had precipitated a fierce rally in Bed Bath & Beyond (NASDAQ: BBBY) shares back in March when RC Ventures – the fund managed by Mr. Cohen – acquired a 9.8 percent stake in the meme stock. Well, Mr. Cohen’s latest moves are sure to spur questions as to whether the top is finally in for the seemingly unstoppable meme stock.
As we had noted in an earlier post, Bed Bath & Beyond shares are currently in a gamma squeeze, bolstered by a relatively benign macroeconomic investor sentiment and copious fuel in the form of sky-high short interest that is now being exploited through large-scale, short-dated call buying activity.
Now, however, Ryan Cohen’s RC Ventures has filed a Form 144 with the SEC, which discloses the “potential sale of up to 7,780,000 common stock and the following call options: 11,257 BBBY CALLS 01/20/23 @ $60, 5,000 BBBY CALLS 01/20/23 @ $80, 444 BBBY CALLS 01/20/23 @$75.”
Cumulatively, Cohen currently owns exposure to 9,450,100 shares of Bed Bath & Beyond. Readers should note that today's filing does not indicate that the stake is being liquidated immediately. Rather, it is an intimation of a possible sale that is likely to occur within the next few weeks.
Bed Bath & Beyond shares are currently facing a multitude of headwinds as well as tailwinds. The stock’s bulls are currently benefitting from an improving macroeconomic sentiment where investors are betting that the peak inflationary impulse has likely passed, setting the stage for the Federal Reserve to adopt a more dovish monetary policy going forward.
Moreover, our favorite contrarian indicator – CNBC’s Jim Cramer – remains bearish on the stock’s prospects, which adds a potent tailwind for Bed Bath & Beyond bulls.
On the flip side, Morgan Stanley expects the broader bear market to resume in September/October as the US economy continues to decelerate while earnings take a hit due to margin compression – slowing down demand removes the ability of the companies to hike prices while the labor costs continue to soar, leading to significant margin compression. This setup remains a threat to the prospects of the ongoing nascent rally in the wider equity universe, including Bed Bath & Beyond.
Will today’s disclosure by Ryan Cohen mark the top for Bed Bath & Beyond shares? We will know soon enough but the stock is down around 13 percent right now in after-hours trading.
Update: RC Ventures Has Liquidated Its Entire Stake in Bed Bath & Beyond
That's it folks. RC Ventures has just filed a Form SC 13D/A, disclosing the sale of the entire 11 percent-plus stake in Bed Bath & Beyond.