The meme stock favorite Bed, Bath & Beyond (BBBY) extended its gains following a bullish options bet from GameStop (GME) chairman Ryan Cohen.
Cohen, who grew a position in the home goods store last year and has pushed for significant changes, including the sale of its buybuy Baby division, bought call options through his RC Ventures investment group in January of next year, which expire at a strike price of between $60 and $80 each, according to Securities and Exchange Commission filings.
A call option gives the purchaser the right, but not the obligation, to purchase shares at a certain price in the future.
Bed, Bath & Beyond's stock has increased by more than 350% in the last three weeks, thanks to notably high trading activity, fueled by a rise in interest in the company, which might be linked to a so-called'short squeeze' that seeks to penalize investors for betting against a particular stock.
According to S3 Partners' recent statistics, short interest is responsible for around 34 percent of Bed, Bath & Beyond's outstanding shares, with a wager against the retailer reaching $317 million.
According to data from the Yolosocks.live website, which tracks real-time mentions of Reddit's r/wallstreetbets chatroom, Bed, Bath & Beyond is the most-visited stock among users, with activity increasing by 65% from yesterday to around 19,000 individual posts.
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In pre-market trading, Bed, Bath & Beyond shares were marked 26.4 percent higher, indicating an opening bell price of $24.50 each.
Bed Bath & Beyond reported a $4.49 per share adjusted loss for the three months ended on May 28, the group's fiscal first quarter, owing to a loss of only $1.46 billion and a 27% decline in comparable sales.
Bed Bath & Beyond has stated that it would reduce its existing inventory "in order to maintain inventory sizes that are comparable to declining sales trends."
In the midst of a growing tide of activist investors, including Cohen, the group has announced the departure of CEO Mark Tritton.
Tritton described the division as a "important cornerstone" of the company's turnaround plans, and said he expects to increase BABY sales to more than $1.5 billion over the next three years, in part due to a November 2021 marketing agreement with Kroger Co. (KR).
Sue Gove, the next CEO, said the company has experienced a "significant shift in consumer behavior" in the summer months.
"This includes substantial increases in income and purchasing patterns, which we will be attempting to address," she said. "Our first quarter's results are neither adequate nor representative of the Company's true potential."