Five months after revealing his stake in Bed Bath & Beyond, activist shareholder Ryan Cohen tapped, prompting a sell-off in the home furnishings retailer’s shares.
The Union, New Jersey-based company fell 27% in late trading after a 20% decline in Thursday’s regular session, after a filing with the U.S. Securities and Exchange Commission confirmed that Cohen’s RC Ventures was withdrawing its position on the company.
RC Ventures sold millions of shares on Tuesday and Wednesday, ranging from $18.68 to $29.21, according to the report. The firm sold thousands of call options amid Wednesday’s rally.
Bed Bath & Beyond shares have been in turmoil this year, with the stock rising sharply in March after RC Ventures first disclosed its 9.8% stake in the retailer and called on it to consider a sale of the company.
Since then, Cohen has agreed to add three independent directors to the retailer’s board and pushed for the departure of CEO Mark Triton. The company announced its resignation minutes before releasing another disappointing earnings report that showed sales fell more than expected in the first quarter. Cohen said the company’s Buybuy Baby unit was undervalued, but no announcement was made about the sale of the property.
A representative for RC Ventures declined to comment.
The stock has become a favorite among retail traders, surging more than 400% from July lows as other investors rallied around so-called meme stocks, pouring their bets on popular social media sites and chat rooms. They bought $58.2 million a day after setting a record $73.2 million, according to data compiled by Wanda Research.
Terrible basics
While retailers are fueling a surge in Bed Bath & Beyond shares, the company’s fundamentals remain weak. Analysts sounded the alarm over liquidity issues and the retailer said it had been working with outside financial advisers and lenders for the past several weeks to strengthen its balance sheet, with plans to restructure by the end of the month.
Wells Fargo analyst Zachary Fadem reiterated his $3 price target, saying “BBBY shares are once again at a wall of economic reality.” A proposed “capital increase” may be prepared to settle the company’s balance sheet.
Wedbush downgraded its stock to neutral Thursday, making it the fourth Wall Street bank in the past two weeks to urge clients to sell the stock. All told, 13 analysts have a sell rating, four have rated the stock a hold, and none recommend a buy. With an average 12-month stock price target of $4.48, brokerage firms expect the stock to decline more than 75% from Thursday’s close.
“From a fundamental perspective, we believe the trends in bed base and beyond are challenging,” Kybanc Capital Markets analyst Bradley Thomas of RC Ventures said in a note after the announcement. It has an underweight price target of $2.
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