What happened
Shares of Bed Bath & Beyond (BBBY) are cratering 41.2% at 11:40 a.m. ET on Friday after it was revealed billionaire investor Ryan Cohen had sold all of his stock and options in the home goods retailer.
Bed Bath & Beyond has been in the midst of a turnaround effort and Cohen seemed to want to help the retailer make a U-turn. His RC Ventures fund had amassed a near-10% stake in the company earlier this year by buying 7.7 million shares and 1.6 million options to buy more at a future date. But his complete exit from the stock pulled the rug out from under small retail investors who bought in on the hope he saw Bed Bath & Beyond's stock rising much further.
So what
Cohen made it seem he was in for the long haul. In addition to buying a large chunk of the retailer, he also succeeded in getting three directors appointed to the board, and led the company's sale of various ancillary businesses and the ouster of its CEO.
While shares spiked on the initial stock purchase, they sagged over the summer as market sentiment in riskier ventures like the retailer were abandoned in favor of more stable businesses.
However, on Monday RC Ventures filed a statement with the SEC showing it had purchased over 1.6 million options that were far out of the money with strike prices ranging from $60 per share to $80 per share. That set off a buying frenzy by traders who assumed Cohen thought Bed Bath & Beyond still had great promise. The retailer's stock soared 78% in three days.
Now what
That's when it all unraveled. Cohen disclosed just before the market closed on Wednesday his intention to sell his entire stake in the company.
Cohen actually began selling his stock on Tuesday during the run-up so that by Wednesday night he had sold all of his stock and options. It was that filing that set off the mass sell-off of Bed Bath & Beyond's stock today.
