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Monday, August 22, 2022
Dear meme stock community,
I know we've had our differences, but hear me out.
I would like to think I understand you all (or most) — since the early days when the movement against “the man” (aka Wall Street) — began with GameStop in 2020.
I get one’s desire to build wealth with little capital to start. I get buying 10 shares of a $5.00 stock and hoping it goes to $25, and how that could be life-changing. I get how the entire investing process seems rigged against someone simply trying to make enough money in the market to send their kid to college. I saw this firsthand back in my analyst days.
I also understand how intoxicating it could be to fall in love with a story stock, with said intoxication usually being fueled by a leader that has been put on a pedestal and almost becomes this mythical creature.
And in this regard, I understand your love for the mythical creature of Ryan Cohen. I see your enthusiastic posts on Reddit, believing Cohen will change the future of Bed Bath & Beyond and GameStop. Or, at least, you hope he writes another mean letter to Bed Bath & Beyond management so that the stock pops. And, ideally, he lays out a grand stock price moving vision for GameStop — where the Chewy founder plays chairman.
What I hope to get you to consider today is that Ryan Cohen is a billionaire that is trying to grow his wealth and market influence through RC Ventures because he can. And please understand: If that means he has to run you over to make it happen, he is going to do it without question.
How is that not one of the takeaways after the past week of shenanigans in Bed Bath & Beyond?
Bloomberg calculated Cohen made $68.1 million in profits from his stake in Bed Bath & Beyond in seven months. A large part of that profit arguably came in the last few days of trading: The stock soared early last week on reports of Cohen’s call option play on BBBY. By Thursday, a filing hits that Cohen has dumped his stake. The stock crashed 40% on Friday, and it’s still under pressure as investors return to focusing on the company’s dreadful fundamentals.
In short, Cohen played an entire ecosystem of average investors like a fiddle in true Wall Street fashion. Cohen made his money and has left a lot of average folks holding the bag. He could do the same with GameStop if he wants or other smaller cap beat up companies. Why? Because he can and you can’t.
Another relevant point: Cohen has largely vanished from media land (other than his strange tweets) as he tries to perpetuate his mythical creature status. Here is Cohen on Yahoo Finance Live in 2019 around the time of the Chewy IPO. As investors, it's good to see people you are putting your trust in.
All this is to say: Be careful who you hitch your ride to, meme community. Cohen hasn’t earned your trust, nor has he earned this “activist” label many people have assigned to him. You want to get a sense of true activist investing? Do a deep dive into Elliott Management. They get things done in a big way.
What to Watch Today
Chicago Fed National Activity Index, July (-0.19 previously)