Key points:
- Gamestop CEO Ryan Cohen just disclosed a 9.8% stake in BBBY.
- Investors cheered the move that could see him take control of the firm.
- Cohen is applying the same strategy he used to control Gamestop.
The Bed Bath & Beyond Inc. (NASDAQ: BBBY) stock gapped 115%+ higher after Ryan Cohen, the CEO of Gamestop, wrote a letter to the company’s management expressing his disappointment with the entire management.
Over the past two years, many familiar with Gamestop’s performance have questioned Cohen’s moral standing in attacking Bed Bath & Beyond’s management team over a lack of results. Yet, the same could be said about his performance at Gamestop.
Also read: Best Shares to Buy Right Now.
Cohen joined Gamestop’s board in January 2021 and became chairman of the video game retailer. Still, apart from making significant changes to the company’s management team, he is yet to unveil a solid turnaround plan.
However, today we are not talking about Gamestop. Instead, our primary focus is on Bed Bath and Beyond. Like what he did at Gamestop, Cohen has amassed a 9.8% stake in the domestic merchandise retail store. But, again, he amassed a significant position and finally took over the firm’s management.
In his letter, Cohen said that BBBY’s management team was overcompensated after being paid $36 million for a company with a $1.6 billion market capitalisation. As a result, sales drop, and the firm slides into the loss-making territory.
The surge in BBBY stock following the public letter shows that investors are desperate for change at BBBY and are willing to support an outsider such as Ryan as opposed to the current management board.
Cohen could capitalise on the overwhelmingly positive support for his proposals to launch a proxy war to replace the current executives with his chosen team to implement the changes suggested in his letter.
The Chewy co-founder intends to break up the BBY by disposing of its profitable Buy Buy Baby brand and selling the remaining business to private equity investors for a profit. Such a move would spell the end of BBBY as a public company but could handsomely reward existing investors.
BBY’s board responded to the letter in a statement saying: “Bed Bath & Beyond’s Board and management team maintain a consistent dialogue with our shareholders and, while we have had no prior contact with RC Ventures, we will carefully review their letter and hope to engage constructively around the ideas they have put forth. Our board is committed to acting in the best interests of our shareholders and regularly reviews all paths to create shareholder value. 2021 marked the first year of execution of our bold, multi-year transformation plan, which we believe will create significant long-term shareholder value.”
Investors should watch BBY stock closely over the next few days to see what transpires, but I would wait for a pullback, given the massive rally, before jumping in.
*This is not investment advice. Always do your due diligence before making investment decisions.
Bed Bath & Beyond stock price.
Bed Bath & Beyond stock spiked 116.25% higher to trade at $34.99, rising from Friday’s closing price of $16.18.