The Ryan Cohen — Bed Bath & Beyond Saga: Examining the Impact of Meme-stock Influencers in Securities Markets

By John Danson, Contributing Author

Introduction:

In early 2022, Ryan Cohen, renowned as the founder of Chewy and chairman of GameStop, made headlines when he acquired a 9.8% stake in Bed Bath & Beyond (BBY). As an influential figure in the meme-stock community, Cohen’s investment brought significant attention to the struggling retail chain. However, subsequent events, including a sharp increase in the stock price, followed by a sudden downturn and Cohen’s subsequent sale of his shares, have led to allegations of securities fraud and insider trading. In this article, we delve into the events surrounding Cohen’s investment in BBY, the accusations against him, and the broader implications for meme-stock influencers and securities regulations.

The Rise and Fall of BBY Stock:

Cohen’s acquisition of a substantial stake in BBY in early 2022 was met with enthusiasm, as investors hoped his expertise would turn the company’s fortunes around. When his investment and activism were disclosed in March, the stock price soared by 34%, indicating investors’ optimism regarding Cohen’s potential impact on the company.

However, despite the initial surge, BBY’s business continued to face challenges, leading to a decline in the stock price by August, reaching below $15. It was on August 16 that Cohen re-disclosed his ownership, revealing he now held 11.8% of BBY’s stock. This re-disclosure reignited investor interest, and the stock price rallied, closing at $23.08 on August 17.

The Meme-stock Influencer Allegations:

As the stock price rollercoaster unfolded, some BBY shareholders took legal action against Cohen, accusing him of securities fraud and insider trading. The crux of the allegations lies in Cohen’s tweets and actions leading up to and after the sale of his BBY shares.

One tweet in particular, featuring a moon emoji on August 12, 2022, raised suspicions among investors. In the meme-stock community, the moon emoji is often interpreted as a signal for an impending stock price surge. As BBY’s stock price did indeed increase significantly in the days following the tweet, some shareholders argue that Cohen used his status as a meme-stock influencer to artificially pump up the stock before selling his shares.

Furthermore, the amended Schedule 13D filed by Cohen, which failed to disclose his plans to sell his shares, added fuel to the allegations. Investors contend that Cohen’s tweets and omissions in the filing were misleading and resulted in a distorted perception of his true intentions, leading to financial losses for some shareholders.

Cohen’s Defense:

Cohen’s legal team has responded to the accusations, arguing that his tweets were expressions of his personal opinion and did not constitute any form of illegal activity. They emphasize that Cohen did not make specific claims about BBY’s future performance and that the stock price increase can be attributed to various factors, not solely influenced by his tweets.

Uncertain Outcome and Broader Implications:

The lawsuit against Cohen is still ongoing, and the outcome remains uncertain. This case serves as a pivotal moment in understanding the dynamics of meme-stock influencers in the stock market. It raises questions about the role of social media in shaping investor sentiment and whether influencers’ actions should be subject to additional regulatory scrutiny.

Conclusion:

The Ryan Cohen — Bed Bath & Beyond saga provides a cautionary tale about the influence of meme-stock influencers and the potential risks investors face in these speculative markets. As the case proceeds, it will undoubtedly prompt discussions on the boundaries of online communications and the responsibilities influencers bear in their interactions with retail investors. Ultimately, it underscores the importance of transparency, accountability, and informed decision-making in the ever-evolving landscape of securities markets.