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Here’s Why Bed Bath & Beyond (BBBY) Decided Not To Fight Ryan Cohen

Simon Mugo trader
Updated 25 Mar 2022

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Key points:

  • Bed Bath & Beyond (BBBY) decided not to fight Ryan Cohen.
  • The retailer decided to embrace Cohen’s ideas, including new directors.
  • The two parties agreed to work together and unlock value for shareholders.

The Bed Bath & Beyond Inc. (NASDAQ: BBBY) stock price rallied 13.2% after agreeing to work with activist investor Ryan Cohen and implement some sweeping changes, including the possible sale of its lucrative buybuy Baby brand.

Also read: The Best Penny Stocks and Cheap Stocks To Buy Now.

Ryan Cohen revealed that he owns a 10% stake in BBBY on March 7, 2022, via a public letter to the management criticising their high pay and lack of commensurate results as the company’s share price keeps falling.

The letter triggered a massive spike in BBBY’s stock price as investors welcomed the move that could have led to Cohen taking on a management role at the household goods retailer to implement some of the changes he had suggested in his letter.

Four days later, on March 11, 2022, news reports emerged that Ryan Cohen had engaged the services of Harkins Kovler, the solicitor frequently used by Carl Icahn, the famous activist investor in most of his proxy battles with public companies.

Kovler usually surveys a company's shareholders to gauge how they will vote on crucial matters such as board changes, which he might be pushing for as he looks to take control of a company and implement his preferred changes.

The only logical reason behind Bed Bath & Beyond’s quick capitulation to Ryan Cohen’s demands was because they knew that most shareholders liked his recommendations and would vote in his favour when it came down to it.

If Cohen launched a full-scale proxy war, the management would have been defeated and probably hounded out of office. Therefore, they quickly signed an agreement with the activist investors allowing him to appoint three of his trusted executives to its board.

Today’s announcement is a smart move from BBBY’s management as they get to keep their jobs for now. However, they could also blame Cohen if his strategy does not work out and the company ends up worse than it is now.

However, I believe Cohen is not one to be outsmarted; hence, he will make sure that he has the final say on any strategy changes implemented by the team since he has his reputation and a significant amount of money at stake if BBBY stock keeps falling.

Mark Tritton, the President and CEO of Bed Bath & Beyond, said: “We look forward to integrating our new directors' ideas to drive our continued transformation. Our buybuy BABY business is a tremendous asset, and we are committed to unlocking its full value. As we move forward, our goals will continue to focus on delivering value for our shareholders, enhancing experiences for our customers, executing on the transformation throughout our business, and creating new and exciting opportunities for our dedicated employees across all our banners.”

Ryan Cohen concluded: “The resolution announced today represents a positive outcome for all of Bed Bath's shareholders. By refreshing the Board with shareholder-designated individuals who possess capital markets acumen and transaction experience, the Company is well-positioned to review alternatives for buybuy BABY. I appreciate that management and the Board were willing to promptly embrace our ideas and look forward to supporting them in the year ahead.”

It remains to be seen how BBBY stock shall perform during the rest of the year as both parties work together to unlock more value for shareholders and customers.

*This is not investment advice. Always do your due diligence before making investment decisions.

Bed Bath & Beyond stock price.

Bed Bath & Beyond stock price 25-03-2022
Source: Tradingview

Bed Bath & Beyond stock rallied 13.21% to trade at $25.02, rising from Thursday’s closing price of $22.10.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading