Bed Bath & Beyond shares slide as activist investor Cohen proposed to sell his stake

The retailer's shareholders have had some ups and downs recently. After an earlier 45% increase, shares are down 12% in premarket trade. Investor and GameStop Chairman Ryan Cohen filed for a proposed sale of his investment in the faltering homeware store, which is what is causing the irrational swings.

The second-largest investor, Cohen's venture capital firm RC Ventures, declared its intention to sell 9.45 million shares, plus options.

His venture capital business purchased call options on 1.67 million shares with a strike price between $60 and $80 on Tuesday. The options expire in January 2023.

After activist investor Cohen stated in a filing that he intended to sell his whole stake in the company through his firm RC Ventures, Bed Bath & Beyond shares fell during extended trading on Wednesday.

Earlier SEC filings revealed that the total cost of the 7.78 million shares directly owned by RC Ventures, minus brokerage costs, is about $119.4 million.

Cohen would make nearly $60 million if he were to successfully sell the whole of his Bed Bath Common Stock at Wednesday's closing price of $23.08. Cohen might have made more money if he had sold the option contracts as well.

Early in March, Cohen made his almost 10% ownership of Bed Bath through his activist firm public for the first time. His assets, according to FactSet, were worth 11.82% as of the end of March.

In a letter to Mark Tritton, then-CEO of Bed Bath & Beyond, Cohen expressed his belief that the homeware retailer was having difficulties managing supply chain issues and reversing market share erosion. Additionally, he pushed the retailer to think about selling its Buybuy Baby franchise.

In June, Tritton was unceremoniously fired by Bed Bath as CEO, and Sue Gove was named as his interim replacement. This occurred after the retailer experienced another quarter of weak sales and significant losses.

Recently, Bed Bath & Beyond has experienced liquidity problems as a result of its cash reserves running low before to the holiday shopping season and during the back-to-school and back-to-college selling seasons, according to CNBC.

In its fiscal first quarter, Bed Bath reported having about $108 million in cash and equivalents, down from $1.1 billion.

According to Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma, Bed Bath is certainly a strong firm, (but) shares are undoubtedly overpriced in the "low teens" and it is insanely inflated at mid $20s.

In June and July, the stock lost more than 60% of its value. Despite the price hike, S3 Partners estimates that 55% of Bed Bath & Beyond's free float is shorted, an increase of 19% over the previous 30 days.

Even so, the meme stock mania has resurfaced recently, and Bed Bath has been the main winner. The stock had risen 58% as of Wednesday's close, considerably surpassing the general market.

With significant trade activity, the retailer of home products' stock has increased by more than 300% just in August. According to FactSet, the stock traded for roughly 400 million shares and another 249 million shares on Tuesday and Wednesday, respectively.