To an army of meme stock investors, Chewy founder and billionaire Ryan Cohen has served as a spiritual guide. Where he invested, they did so too, first at GameStop and then at Bed Bath & Beyond.
But last summer, the relationship grew more complicated. As Bed Bath & Beyond’s stock price briefly spiked, Cohen quietly offloaded his entire stake, netting a reported $68 million profit. When news broke of his sell-off, the stock collapsed 40 percent. Then it kept falling, down and down, until it was trading at roughly 1 percent of last August’s price—leaving many retail investors with virtually worthless shares.
On Sunday, the company announced that it was filing for Chapter 11 bankruptcy and would wind down its operations.
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That news secures one of two legacies for Cohen as it relates to the business, depending on whom you ask. Either he was a prophetic investor who timed his exit perfectly, knowing that bubbles inevitably collapse. Or, he was an irresponsible participant in the meme stock craze who knew his endorsement of the stock would encourage Average Joe investors to pile in, driving up the price in time for him to sell.
“He does know about the power that he has…and that when investing in companies, people will follow him,” said Christina Sautter, a professor at the Paul M. Hebert Law Center at Louisiana State University.
Many participants in the meme stock frenzy have developed bizarre, parasocial relationships with powerful investors and CEOs—including Cohen—she said. “Cohen definitely cultivates that. And is there a possibility for manipulation of that? Yes, absolutely.”
Some of those retail investors were blindsided when Cohen sold his stake, believing that they were collectively invested for the long haul. But it isn’t clear whether Cohen’s conduct crossed ethical or legal lines, Sautter added. In fact, there is a compelling case to be made that retail investors should not have taken the advice of a profit-seeking billionaire to begin with.
Representatives for Cohen did not respond to a request for comment.
For more than two years, Cohen—intentionally or not—has fueled erratic stock market behavior. hen he joined the board of GameStop in January 2021, its stock exploded more than 2,000 percent on the belief that he would revive the ailing business—and as meme stock traders battled against Wall Street short sellers.
Since then, Cohen has embraced his newfound fame, dispensing opinions about corporate governance on his Twitter feed, along with unrelated pearls of wisdom such as, “Flatulence is the best icebreaker” and “Are dingleberries fruit?”
In early 2022, he announced that he had amassed a sizable stake in Bed Bath & Beyond; its stock price rallied, too, and Cohen hashed out an agreement with the company that let him appoint three members of the board. The company continued to struggle, however, and its stock price was soon trending downward.
The controversy over Cohen’s Bed Bath & Beyond investment mainly centers on events in August. According to a subsequent class-action lawsuit filed in DC District Court, that month Cohen submitted overdue SEC forms indicating that he held a large stake in the company. The information was not newsworthy, yet some meme stockers misinterpreted the filings as proof that he was still all-in. He also sent out a tweet that included a moon emoji, which some people took as an indication that Bed Bath & Beyond’s stock would take off, “to the moon!”
“Cohen used his access to Company executives and his information advantage to exit his large position in the Company at a substantial profit,” claimed an amended version of the complaint filed in January. “[He] secretly sold the entirety of his interests in the Company while abandoning ordinary investors, who looked to him for guidance.”
Cohen’s attorneys have disputed the allegations and have filed a motion to dismiss the case. (There are also other defendants in the proceedings, including Bed Bath & Beyond CEO Sue Gove. Former chief financial officer Gustavo Arnal was previously removed from the litigation after he died in September.)
Until the courts weigh in, outsiders are continuing to debate Cohen’s behavior. Columbia Law School professor Eric Talley defended Cohen’s decision to sell, calling it “totally smart” to exit with a profit. “He finally did what most people predict should happen when there's a meme stock bubble.”
To the extent that Cohen helped create that bubble to begin with, Talley added, “so did all the other [meme stock] folks that were investing alongside him.”
Even before the bankruptcy announcement, retail investors were licking their wounds on Reddit forums, with many of them bemoaning giant losses. Remarkably, though, some members of the community have continued to stick by Cohen. “I have no more money for his next pet project,” one user complained on April 14. “Dont fuckin lie,” replied another, “you’ll find a way to buy at least 1 of whatever he’s taking a bite of.”
As for the lawsuit, Thomas Hazen, who teaches securities regulation at the University of North Carolina School of Law, said that proving Cohen engaged in pump-and-dump behavior will require a high bar of evidence, including that the billionaire planned his exit well in advance. “They really have to find a smoking gun,” he said, of the plaintiffs.
As of yet, it isn’t clear they have one.
