Bed Bath & Beyond meme stock fell more than 40 percent

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Bed Bath & Beyond fell more than 40 percent on Friday as investors took a hard stop on meme stock’s meteoric rise, exposing the volatility and immense risk that has defined a new era of social-media fueled investing.

But Wall Street punished both meme stocks and blue chips as investor sentiment soured, sending major indices down. The S&P 500 broke a four-week winning streak, ending a summer rally driven by a fresh round of positive economic data that quelled some fears of a recession.

The Dow Jones Industrial Average fell 292 points, or more than 0.9 per cent, to end at 33,706.74. The broader S&P 500 fell 55 points, or 1.3 percent, to 4,228.48, while the tech-heavy Nasdaq fell 260 points, or 2 percent, to 12,705.22.

With investors still grappling with the uncertain direction of the country’s economy, federal data provide conflicting insights. Earlier this month, analysts were stunned by a thumping jobs report, revealing a heated labor market that strengthened more than expected and employers added 528,000 jobs. But government data released a few days ago also showed the economy had approached a second consecutive quarter, a common marker of slowdown.

Why did Bed Bath & Beyond shares rise more than 350 percent this month?

How aggressively the Federal Reserve will move to tackle inflation and the pace of price hikes, which eased in July, remain at the front of Wall Street’s mind. Stocks have rallied in recent weeks, in part, fueled by investors’ growing sentiment that central bankers can successfully control inflation without putting the economy in recession.

Corporate powerhouses such as Apple, Microsoft and Amazon have posted double-digit gains over the past several weeks, recovering some of their losses for the year.

Then there’s Bed Bath and Beyond. It had risen more than 350 percent this month, riding a wave of enthusiasm from smaller investors after billionaire investor Ryan Cohen took a large stake in the struggling retailer. But the stock has been pushed into a one-day decline ever since the GameStop chairman indicated he would dump his shares. He lost 19.6 percent on Thursday and another 40.5 percent on Friday, ending the week at $11.03. It’s still more than double where it was before the meme stock rally earlier this summer.

“Bed Bath & Beyond’s stock has been decoupled from the fundamentals,” said Seth Basham, an analyst covering the retail stock at Wedbush Securities. Cohen’s return was a major catalyst in downgrading the stock, he said, as one of the company’s main motivators changed its position for a successful turnaround.

Student, 20, creates $110 million trading meme stock Bed Bath & Beyond

Cohen’s RC Ventures confirmed in a regulatory filing that it has sold its entire stake in Bed Bath & Beyond. According to MarketWatch, he made a profit of more than $58 million, after selling 7.78 million shares at weighted average prices ranging from $18.68 to $29.22.

Bed Bath & Beyond stock has now lost more than half of its value since its most recent peak, when it climbed above $20 per share. Roller coaster movements and huge trading interest echoed the 2021 meme stock frenzy, when many novice investors, attracted by the hype and potential for huge gains, ended up losing big.

Just last month, the troubled home goods chain was trading near $5. But investors bought into the company’s optimistic outlook or were banking on a cycle of further speculation and higher prices, echoing the staggering rush in stocks like Gamestop, AMC and Blackberry that took Wall Street by surprise last year.

Cohen, who co-founded the online pet supply company Chevy, has had a significant impact with smaller investors because he was instrumental in the rise of GameStop. He took a major stake in it in 2020 through RC Ventures, even though the gaming series was written off as a relic of an earlier era, one when a massive retail footprint was necessary and when consumer interest was stymied by the Black Friday rush. And Blockbuster was defined by the game. release.

Cohen offered investors a future-oriented vision for the gaming retailer, focused on digital sales, esports, streaming and mobile gaming. His idea sparked interest in web forums, where a collective optimism was established, and where many saw an opportunity for big gains by betting against the institutional wisdom of Wall Street. His interest in Bed Bath & Beyond garnered comparable enthusiasm.

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