ສິ່ງທີ່ Ryan Cohen ຂອງ Chewy ຕ້ອງເຮັດກັບ Meme Stock

ການຮັບເອົາທີ່ ສຳ ຄັນ

• Ryan Cohen’s investments over the past two years have mirrored sentiment from meme stock investor communities, like the WallStreetBets subreddit.
• Cohen has used the collective power of these communities for his own profit, even as he fails to turn around the financial standing of the companies he’s invested in, like Bed Bath & Beyond and GameStop.
• The worship of Cohen in these communities may or may not fade after the BBBY debacle, but there are better ways to engage with short squeezes that are based on actual data regarding a company’s financial performance.

Ryan Cohen has been attracting a lot of attention for his involvement in meme stocks over the past two years. Not all of that attention has been good.

For example, his recent divestment from Bed Bath & Beyond signaled a betrayal of the same meme investor community that has propped him up as nothing short of a god in recent months. Not only were his actions morally dubious, but Cohen’s also staring down a class action lawsuit for using his position to artificially inflate BBBY prices before he left.

Before you can fully understand Cohen’s role in this particular meme stock, you need to understand his history with this very recent phenomenon, including his involvement with GameStop – the ultimate meme stock.

Let’s start at the very beginning, with the meme stock community itself.

A brief history of WallStreetBets

If you browse the WallStreetBets subreddit – the most popular meme stock community online – you’ll find retail investors discussing stocks and investments with memes and copious slurs.

Many of these investors are using the forum’s ‘advice’ to invest their savings in a manner that’s more akin to gambling than building a modern investment portfolio.

The subreddit was founded in 2012 by Jamie Rogozinski, a 30-year-old, single professional who did, in fact, have disposable income. He wanted a place to discuss high-risk investments in a “lighthearted” way, so he created WallStreetBets. The community started out small, but grew over time with the popularization of apps like Robinhood, Etoro, etc.

The meme stock story starts several years later, in the summer of 2020. That’s when u/DeepFuckingValue, real name Keith Gill, started posting videos on YouTube under the username Roaring Kitty.

Gill formerly worked for Massachusetts Mutual Life Insurance Company, and the first mention of GameStop (GME) as an undervalued stock on his channel came on July 27, 2020.

Gill became an influential voice on WallStreetBets. The price of the stock inched upwards over the last quarter of 2020 as retail investors attempted to thwart major hedge funds that had short positions on GME.

Ryan Cohen prior to GME

Ryan Cohen was the cofounder of Chewy, a pet supply eCommerce company that he sold to PetSmart in May 2017. He was one of those inspirational stories of an internet entrepreneur with a lot of privilege but no college education who successfully built a mega business with huge profits, despite being told he’d never be able to compete with Amazon. He was a contrarian. A disruptor.

He was also successful in his ventures. After selling to PetSmart for $3.35 billion, Cohen stayed on as CEO until 2018. In June 2019, the company went public.

A month later, Cohen joined Twitter with a personal account (@ryancohen). His tweets were sporadic and largely professional, primarily sharing major media features of the Chewy cofounder himself.

GME and Ryan Cohen

Gill and Cohen apparently shared overlapping opinions about GME. On Aug. 31, 2020, Cohen’s investment firm – RC Ventures – bought up 5.8 million shares for a 9% stake in the company. While Cohen’s investment didn’t start GME’s upward trajectory, it certainly helped it along in the tail end of 2020.

Cohen thought GameStop could turn itself around by building out the eCommerce side of its business, which was notably lacking for a company that specializes in gaming. He purports to have made private requests for changes in the company, but says they went unanswered.

With that reasoning, in November of 2020 he wrote a public letter to the board. In it, he requested that Gamestop:

• Shore up real estate expenses.
• Shut down non-essential operations in Europe and Australia.
• Focus on acquiring better talent.

He also indirectly criticized the CEO, George Sherman, for being dedicated to an outdated brick-and-mortar model.

WallStreetBets finds an ally in Cohen

Meme stock investors did not overlook the fact that Cohen shared many of their same opinions on GME. He became a sort of hero to them, lending more legitimacy to their ‘theses.’

At first, Cohen was not fully engaged in the meme investor community. He was watching, and the watching may have even influenced his initial decision to purchase GME. But he did not appear to be publicly affiliated with the community itself.

That started to change in early January 2021, as his tweets became less professional. On Jan. 6, he tweeted an image of a Blockbuster store captioned by a poop emoji.

This first tweet was mild compared to the increasingly crass meme-investor-adjacent tweets he sent out over the course of the next year and a half. But this was the first marked move away from a more polished, professional public image for Cohen.

A few days after that, Cohen was appointed to GameStop’s board of directors. Effective Jan. 11, 2021, the new focus of the company would now align with his eCommerce vision.

At this point, WallStreetBets really started to light up. The meme investors rallied. Assured by their new perceived alliance with the ‘meme lord,’ as they often referred to Cohen, they believed they could cause a short squeeze.

Then, a bunch of hedge fund managers who thought GameStop was overvalued, shorted the stock. There were so many people shorting the stock that if the stock rallied, it would cause massive financial damage to the hedge fund investors.

This meme stock rally – the first ever of its kind – was successful, forcing big names like Melvin Capital out of their positions. While the community still doesn’t think it’s done enough to call the short squeeze successful, the abnormality it caused was historic, and plenty of big money managers have been hurt along the way.

Cohen helped GME – but not GameStop

Cohen’s involvement in GameStop has undoubtedly caused a rise in stock pricing, largely thanks to the support he receives from the meme investor community. Even if it has not been stable, perpetual growth, GME is still sitting at $27.36. It was hovering at or below $4 prior to his initial investment in November of 2020.

But as far as material improvements in GameStop’s financial viability, Cohen still has a lot to prove. Revenue dropped more than 20% in 2021. While year-over-year revenue was up to $1.38 billion in Q1 of 2022, compared to $1.27 billion in Q1 of 2021, the company still sustained a $157.9 million net loss, compared to a $66 million net loss the year prior.

It remains to be seen whether Cohen can improve the company’s health beyond an artificial ballooning of the stock price fueled by his fan base. In this moment, it’s more important than ever for him to prove it, because the moves he just made with Bed Bath & Beyond may have cost him a lot of fans.

WallStreetBets and BBBY

Around the same time as the GameStop meme surge in January 2021, the WallStreetBets community rallied around another stock that was also heavily shorted: Bed Bath & Beyond (BBBY).

The stock rallied and dipped throughout 2021, with many short sellers having to relinquish their positions, driving the price up even higher as they had to buy their way out. Despite the turbulence caused by meme investors, it remained one of the most heavily shorted stocks even through 2022 due to the company’s massive fiscal problems.

Cohen gets in on BBBY

A year after establishing his status as a WallStreetBets legend with GME, Cohen hopped on the BBBY bandwagon, too. He started buying shares in Bed Bath & Beyond in January of 2022, revealing his 9.8% stake in the company in March of the same year.

The stock climbed up in value for a little less than a month. But it was all downhill from there. Over the course of 2022, bad news from Bed Bath & Beyond financials just kept getting worse.

The blip in increased consumer spending on home goods was over by 2021, as more and more Americans started throwing coronavirus precautions to the wind, spending less time at home. Consumers also lost discretionary spending due to inflation.

Bed Bath & Beyond reported a 29% drop in sales compared to pre-pandemic levels in 2021, and in Q1 of 2022, it reported a further 25% drop in year-over-year sales compared to Q1 of 2021.

By July, BBBY prices had flatlined between $4 and $5.

Cohen exits BBBY with significant profits

Cohen decided Bed Bath & Beyond had problems he couldn’t fix, after all. He likely purchased more BBBY during the summer slump, because he sold his cumulative 7.78 million shares for an estimated profit of $68 million on August 16 and 17, 2022.

This was after a meme investor rally at the beginning of August that brought shares up significantly from where they had sat in July, but not nearly as high as when Cohen originally entered the company in January 2022.

Class action lawsuits and tragedy

The stock has since returned to its downward trajectory. More troubling news was publicly revealed a few days after Cohen’s departure: Bed Bath & Beyond was so far behind on payments that some vendors started refusing to fulfill orders.

On September 2, 2022, CFO Gustavo Arnal ຫມັ້ນສັນຍາ suicide by jumping from the 18th floor of his apartment building in lower Manhattan. Notably, both Arnal and Cohen were named as defendants in a class action lawsuit for artificially inflating BBBY prices.

Cohen’s betrayal of WallStreetBets

Some members of the WallStreetBets community feel betrayed by Cohen. They did, after all, rally to him only to be sold out, with some meme investors losing their life’s savings. Others hold him blameless, continuing to believe in his genius without holding a grudge that he used them for his own profit.

Some even assert that Cohen ‘felt bad about what he had to do.’

You wouldn’t guess he felt remorse by looking at Cohen’s Twitter feed, though, which has been far less active since the mid-August BBBY sale. The crass memes have stopped for now, with the only new tweet, dated Aug. 24, reading:

GameStop store leaders ❤️

What does this mean for the future of meme stocks?

Cohen has played heavily in the meme stock investor pool over the past two years. Whether or not his most recent financial betrayal will alienate him or propel him to new heights has yet to be seen. The impending class action is also likely to play a big role in the future of meme stock trading trends.

One thing’s for sure, though: the meme stock world is not built on the actual financial viability of a company. It’s not built on long-term growth. It’s largely built on short squeezes and hopes of quick, easy money with a little bit of celebrity influence mixed in to boot.

If you’re interested in doing short squeezes right, you won’t find the best information on the Reddit boards. Instead, you can turn to Short Squeeze Kits, which actually assess a company’s real-life historical and technical financial data to help you make good choices. This is superior to making investment decisions based on the ‘vibes’ you catch on Reddit forums.

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