A 20-year-old American university student has made a profit of $110m (£91m) with a month-long bet on the Bed Bath & Beyond meme stock.
Jake Freeman and his family bought nearly 5 million shares of the struggling US home goods retailer at less than $5.50 a share in July for a total outlay of around $25 million.
After a nearly 500% increase in shares, triggered by intense discussions about the stock on the Reddit discussion forumsincluding several Freeman publications, he sold them for over $130 million – crystallizing the huge profit.
They hit $28 on Tuesday, when Freeman reportedly sold most of his stake. Shares of Bed Bath & Beyond, which trade on the symbol BBBY, fell to $23 on Wednesday and were down another 14% in premarket trading Thursday at $19.70.
Meme stocks are those that skyrocket regardless of a company’s success, thanks to the hype on message boards and social media. They rose to prominence early last year when shares of troubled companies like the American retail company GameStop skyrocketed, in part spurred on by a campaign to punish hedge funds betting their value would fall.
Although these stocks eventually came back down, the meme stock trend had a renewal this summerwith BBBY stocks leading the way.
Freeman, an applied math and economics student at the University of Southern California, said he was “shocked” by the speed of the stock surge.
“I certainly didn’t expect such a vicious rally to the top,” Freeman told the Financial Times in an interview. “I thought it was going to be a game over six months…I was really shocked it was going up so fast.”
Freeman, who has regularly interned at New Jersey hedge fund Volaris Capital, said he celebrated business success by going to dinner with his parents in the New York suburb where they live.
The student, who at one time owned more than 6.2% of BBBY through his fund Freeman Capital Management according to U.S. Securities and Exchange Commission (SEC) filings, said he raised the $25 million stake from friends and family. Her uncle is Scott Freeman, a former pharmaceutical industry executive who helps run the FCM fund.
When his stake in BBBY was revealed last month, he wrote to the company’s board warning that the retailer was “facing an existential crisis for its survival”. “To ensure its survival, BBBY must reduce its cash burn rate, significantly improve its capital structure and raise funds,” he said in the letter according to a copy filed with the SEC.
At the same time he introduces himself to the members of the BBBY Reddit page with an article titled Giving BBBY a chance. “Hi everyone, I’m Jake Freeman,” he said. “I sincerely believe that the plan proposed by the FCM probably presents a great opportunity for BBBY to succeed. It offers a “buy-buy-time”. »
Freeman told Redditors that he “has been in the financial industry since he was 14 and had an interest in finance since he was 12.” He said he was particularly interested in “the problem of planar isoperimetry under Gaussian measure”.
When he was 16 he co-wrote an article called irreducible risks of hedging a bond with a default swap.
BBBY shares fell in after-hours trading on Wednesday after GameStop chairman and 12% shareholder Ryan Cohen revealed he planned to sell his entire stake.