by On Tuesday, volatile trading saw shares of Bed Bath & Beyond climb by nearly 60% to a high of five months.
This was because investors were rushing toward the stock because a recent filing showed that Ryan Cohen, the activist investor, had made its latest bet on the retailer of home goods.
The stock rises
The trading session saw the stock rise as much as 78.8% to reach $28.60 and trading had to be halted a number of times because of volatility.
RC Ventures is the name of the investment vehicle of Ryan Cohen and it has become the second largest investor in the company.
The board has also seen the addition of three independent directors and has purchased call options that have an expiry date of January 2023.
These call options are on 1.67 million shares that boast a strike price between the range of $60 and $80. The option offers a buyer flexibility to purchase or sell a security on a given date and at a given price.
Purchasing a call option essentially means that the investor is betting on the price of the underlying asset to go up.
Greater interest
Market analysts said that when Cohen’s name is associated with something, it gets the buzz going. Therefore, there is a lot of social media hype surrounding Beth Bath & Beyond.
In addition, they said that this buzz was likely to spill to other stocks in the market as well. The shares of the home furnishing company were the most traded on the platform of the Fidelity brokerage.
This showed that retail investors were taking an interest in the stock. By 2:30 p.m. ET, there were approximately 300 million shares that had changed hands.
This was far greater than the 30-day moving average volume of the stock of almost 29 million.
Analysts further added that 50.7% of Bed Bath & Beyond’s public free float has ended up in short position. They said that this had resulted in a short squeeze signal.
The stock
So far in this month, the home retailer’s stock has already made gains of 440% in a rally, which is similar to the eye-watering increases in shares of AMC Entertainment and GameStop early in the previous year.
It had ended up hurting hedge funds that had placed their bets against the stock. There are some other stocks that were highly shorted, such as GameStop, TV streaming co FuboTV, meal-kit deliver maker Blue Apron and barbecue grill manufacturer Weber Inc.
These stocks recorded gains of somewhere between 8% and 53%. On Tuesday, Bed Bath & Beyond had opened lower, after the stock had its rating downgraded to ‘sell’ by B. Riley.
They had said that the shares of the home retailer were trading in the market at ‘unrealistic valuations’. There is no denying that the rising interest had prompted the stock to climb higher.
It is possible that the share price may come down in the next couple of days, if interest dies down a bit.
