The saga surrounding Bed Bath & Beyond (BBBY -34.29%) stock continued Thursday after yet another twist from widely followed activist investor Ryan Cohen. The stock quadrupled in the first half of August as the meme stock craze took hold once again in the market. But a new Securities and Exchange Commission (SEC) filing by Cohen dated Tuesday has the bubble bursting in the stock today. Bed Bath & Beyond shares plunged almost 30% in early trading, and remained down 23.6% as of 11:20 a.m. ET.
The latest Form 144 filing from Cohen indicates his intention to sell all of his over 9.45 million shares. That includes almost 8 million shares of common stock and the balance owned through call options purchased earlier this year.
The discussion of those call options seemed to be the catalyst for the recent surge in the company's stock price. It's possible that retail traders and others who consider this a meme stock didn't realize those call options had been purchased months ago, and thought Cohen was making a more current bet. But now Cohen wants to cash in, and it is tanking the stock.
Cohen's total ownership amounts to 11.8% of the company's outstanding shares. It's not clear from his filing if he has already sold some or all of his shares. What is clear is that the run-up in the shares wasn't sustainable based on the company fundamentals.
Today, Wedbush analyst Seth Basham issued a downgrade to the equivalent of a sell rating. In a note shared by MarketWatch, he wrote, "More pressing, however, is BBBY's cash burn and the prospects for further financing needed to shore up its balance sheet and rebuild supplier confidence." Basham has a $5 price target on the stock, which would be a drop of more than 78% from Wednesday's closing price.