[ Making Money ] 20-year old figures out how to make $110 million in 3 weeks trading Bed Bath & Beyond stock
Jake Freeman amassed big stake in the struggling retailer before share price soared and after he sent an encouraging letter to share holders ... what is his next move?
In Surreal Story, 20-Year-Old Student Acquires 6% Of Bed Bath & Beyond, Makes $110 Million In 3 Weeks
by Tyler Durden
Thursday, Aug 18, 2022 - 09:01 am
We thought that today's story about Ryan Cohen filing to dump his entire stake in Bed Bath & Beyond after sparking a massive gamma squeeze using deep OTM call options would be the most absurd meme-related story of the day. Boy, were we wrong.
In a late Wednesday article published on the FT which at first (and second, and third) read comes across as a cross between absurdist satire and a PR puff piece, we read the day's feel-good "riches to riches" story in which a 20-year-old university student, Jake Freeman, who is an applied mathematics and economics major at the University of Southern California, managed to accumulate 6.2% of the entire outstanding stock of Bed Bath & Beyond at under $5.50 share (did we mention he is a 20-year-old university student) amounting to $27 million, which he announced in an activist 13-G letter to BBBY Management on July 21, 2022, and less than a month later sold out of his entire stake - thanks to the insane gamma squeeze in the stock - not through some prime broker but through his TD Ameritrade and Interactive Brokers accounts, making $110 million in the process!
First things first - how the FT got the idea for the story in the first place was rather inspired: they looked at the HDS page of BBBY and found that the 4th largest holder of BBBY is a completely unknown entity called Freeman Capital, which alongside only Ken Griffen's Citadel and Federated Hermes, were the only three Top 20 holders to build out their entire stakes in the second quarter (as a reminder, shortly before the close we learned that the 2nd largest holder, Ryan Cohen's RC Ventures, filed a 144 to dump its entire 9.450MM share-equivalent stake). And while we wait for RC Ventures to liquidate its stake, we now know for a fact that the #4 top BBBY holder already sold to unwitting retail investors.
What is remarkable is that at the same time Freeman disclosed its 6.21% (or 4,968,000) stake, the 20-year-old also sent out a 9 page activist letter (hardly the stuff 20-year-old college math majors write) to BBBY management explaining that the company is "facing an existential crisis for its survival" and that the company "needs to cut its cash-burn rates, drastically improve its capital structure and raise cash." The first page of the letter is below (link to the full letter here). In it...
... Jake Freeman writes that his "plan for the realignment of BBBY consists of two crucial legs: cutting debt and raising capital." He proceeds to detail his proposal for both legs, which would culminate in reducing the company's senior debt from $1.2 billion to $500 million (through an exchange offer of the current discounted debt into far less par debt), and the issuance of converts to somehow raise $1 billion in the market (how this would have worked when the stock was trading around $5 with imploding EBITDA is anyone's guess). But what was most remarkable is what Freeman said in the highlighted section: namely that the "US options market is pricing in high implied volatility for BBBY derivatives which can be leveraged and capitalized on in order to effect a realignment of BBBY's debt", in other words a debt reduction using... a gamma squeeze?
Perhaps. We don't know who on the board (or management team) read Freeman's letter, or what they did next, but less than ten days after the recent teenager shipped out his "activist letter" to BBBY, the stock doubled, then tripled, quadrupled and so on, from his cost basis... at which point Freeman, quite content with the 6x return he made on his initial investment of $27 million, sold his BBBY stake north of $130 million, making more than $100 million in less than a month!
By this point, readers should have some questions, like for example how did a 20-year-old get $27 million in cash to buy 6.2% of the outstanding shares of Bed Bath & Beyond, and become the 4th largest shareholder? Here, the FT comes to the rescue:
Freeman’s initial stake cost about $25mn, which he said was mostly raised from friends and family. He has invested for years with his uncle, Dr Scott Freeman, a former pharmaceutical executive. The two recently built an activist stake in a publicly traded pharmaceutical company called Mind Medicine.
There's more:
Freeman also said he had interned for years at a New Jersey hedge fund, Volaris Capital. Just before his 17th birthday, Freeman and its founder, Vivek Kapoor, a former Credit Suisse executive, published a paper titled “Irreducible Risks of Hedging a Bond with a Default Swap”.
But we digress: let's get this straight: "friends and family" handed a tiny $25 million (really, $27 million) to a 20-year-old math major at USC, whose extensive financial background is co-investing with his uncle "a former pharma executive" and interning at a hedge fund located above a Starbucks office in Milburn, NJ, yet which oddly enough is primarily focused on various options trading strategies.
... $25 million which he invested, through his hedge fund Freeman Capital Managent, LLC, which doesn't really exist except through a Sheridan, Wyoming-based commercial registered agent at 30 N Gould St. (where more than one registration scam has been discovered recently) and which was "founded" in May 2022 ...
.... into just one high-beta, practically bankrupt stock just weeks after the company reported dismal earnings report according to which BBBY sales plunged by 25% in Q2 while its net loss widened to $358mn from $51mn, and its cash position had dwindled to just $107 million from $1 billion at the start of the year, or just a few weeks from insolvency, culminating a catastrophic trend of disappearing EBITDA.
Surely such a concentrated, undiversified investment by a young "hedge fund" guru who doesn't even have an active Bloomberg account...
... screams "fiduciary duty", and we can only applaud the "friends and family" who handed their $25 million to this young investing wizard, who were surely expecting a few percent returns here and there, instead of a 5x return in 3 weeks. Surely.
According to the FT, Freeman himself quite shocked by the outcome: “I certainly did not expect such a vicious rally upwards,” Freeman told the Financial Times in an interview on Wednesday. “I thought this was going to be a six months plus play . . . I was really shocked that it went up so fast.”
So young Master Freeman was expecting the 5x return to take place in "six months" but was "really shocked" it took just 24 calendar days. Come to think of it, we would be too (or maybe not, especially since the entire idea was that of Jake's uncle Scott, M.D.... but more on that in a subsequent post. But here one additional thing is worth noting, between July 13 (when FCM BBBY HOLDINGS, LLC was registered in Wyoming by Jake Spencer Freeman) and July 20 when the 13G was filed disclosing the 5 million share stake, just 41.9 million shares traded, which means that young Master Jake was in quite a rush to build up his stake: as JC Oviedo pointed out, "to amass its stake in this time period, FCM BBBY HOLDINGS, LLC would have had to be over 11% of the average daily volume!"
That's not only a ton of conviction where to put in every last penny of your "friends and family" money but one hell of a rush too.
Finally, what did Freeman do after making $100 million in what may be the luckiest investment ever made by a 20-year-old?
After selling the shares, Freeman went for dinner with his parents in the suburb of New York City where they live and on Wednesday he flew to Los Angeles to return to campus, he said.
We, for one, can't wait to see how Freeman Capital Management makes its next 5x return in under a month next (actually we know how, and we will reveal it tomorrow).
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How a 20-year-old USC student netted $110m from a Bed Bath & Beyond stock dump at exactly the right time
BY SOPHIE MELLOR
August 18, 2022 at 7:26 AM CDT
https://fortune.com/2022/08/18/jake-freeman-usc-student-netted-110-million-dollars-in-bed-bath-beyond-stock-dump/?fbclid=IwAR03AUjiAU1EMw3nwF-V95_N9N7SeLS8L-xpHM_4RzrXfbHVOrpSKSuWS2k
Shares in Bed Bath & Beyond surged more than 70% on Tuesday as retail investors flocked to the meme stock.
At around 2:00 pm ET in the afternoon on Tuesday, the share price of Bed Bath & Beyond dropped from more than $26 a share to below $20 in a matter of minutes.
The stock (BBBY), which has soared 440% over the past month as part of a Reddit-fueled squeeze, floundered for an hour or two before jumping back up to the $27 range.
As some Reddit users quickly scooped up the hot shares, others looked for answers.
“That million share dump was [Freeman Capital Management] I believe,” user DFWRestaurantGuy posted a couple of hours after the drop.
“That drop at 2 pm with 1 million shares my guess was FCM liquidating the rest of their shares.” they added.
“Did Jake Freeman sell all his BBBY? Am I reading this right?” another user, LunchOptimal5325, posted.
It wasn’t Freeman who triggered the drop in stock price.
The 20-year-old USC student posted on Reddit that he had exited his $130 million position before noon.
“The significant appreciation of BBBY’s share price combined with the fact that I am leaving for school tomorrow played critical roles in closing the Position,” Freeman wrote in a post on Reddit.
But some users weren’t convinced.
In a roundup of the day’s trading, a user wrote in a 5.7k upvoted post: “Some whale…dumped his entire holding of $BBBY dropping the price from ~$27 down to ~$20. That’s right, Freeman Capital Holdings dumped a position worth ~6% of $BBBY.”
Even as others corrected the post saying Freeman claimed to sell his shares before noon, others were incredulous.
“I think he had something to do with the afternoon dump as well, but that’s just speculation,” WeirdSysAdmin wrote.
So who is this 20-year-old who netted a rough $110 million from his selloff of Bed Bath & Beyond?
Who is Jake Freeman and how did he do it?
An applied mathematics and economics major at the University of Southern California, Freeman bought more than 5 million shares in Bed Bath & Beyond in July.
He made the buy shortly after the company ousted its CEO Mark Tritton following a dismal first-quarter financial report in late June showing that sales plunged 25%, revenues fell to $1.46 billion, and the company was drowning in $3.28 billion in debt with only $107 million cash on its balance sheet. Freeman’s buy-in came months after Ryan Cohen, the founder of online pet goods retailer Chewy and the chairman of GameStop, bought a 10% stake in Bed Bath & Beyond in March.
Cohen is a much-loved figure on Reddit investing forums after he bought a 10% stake in GameStop and joined the company’s board in January 2021, in part triggering the infamous meme stock rally. Freeman acquired his shares in Bed Bath & Beyond when the price of the stock was below $5.50 a share with $25 million he raised from friends and family.
He placed it all on Bed Bath & Beyond and became the second largest non-institutional investor in the company, after Cohen, with a 6.21% passive stake. Freeman wrote a scathing message to the home goods retailer’s board after investing, warning the company is “facing an existential crisis for its survival.”
Freeman advised Bed Bath & Beyond to cut its debt and raise more capital through a convertible loan issuance, without providing a plan to turn around the company’s declining cash flow or injecting capital.
But despite plummeting sales and rising debt, the price of shares in Bed Bath & Beyond still went up fourfold on Tuesday, and less than a month after Freeman bought in, he sold $130 million worth of stock from his TD Ameritrade and Interactive Brokers accounts.
“I certainly did not expect such a vicious rally upwards,” Freeman told the FT. “I thought this was going to be a six-months-plus play…I was really shocked that it went up so fast.”
The selloff came at the right time.
After trading closed on the day Freeman sold his shares, a regulatory filing from Cohen’s venture capital firm RC Ventures revealed plans to sell its entire 11.8% stake within the next 90 days—sending shares down 15% in after-hours trading.
Bed Bath & Beyond shares are now at $19.77 at 6:30 am ET in pre-market trading.
The price drop certainly didn’t concern Freeman.
After selling his shares, he went for dinner with his parents in the suburb of New York City where they live before flying out to Los Angeles on Wednesday to return to campus, Freeman told the FT.
“I am truly going to miss being able to say ‘I am the second largest non-institutional shareholder of Bed Bath & Beyond,’ but I am certainly going to be shopping at [Bed Bath & Beyond] tomorrow,” Freeman wrote in a Reddit post.
Freeman has now built up an activist stake in a publicly traded pharmaceutical company called Mind Medicine.
He did not respond to Fortune‘s request for comment.
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story from Financial Times
A 20-year-old university student has made a roughly $110mn gain by selling a stake in struggling retailer Bed Bath & Beyond, after its stock price soared during a month of frenzied trading reminiscent of last year’s meme stock boom.
Jake Freeman, an applied mathematics and economics major at the University of Southern California, acquired nearly 5mn shares in Bed Bath & Beyond in July, according to regulatory filings, after dismal earnings and the ousting of its chief executive sent its stock price plummeting.
Freeman bought his stake at under $5.50 a share. On Tuesday, Bed Bath & Beyond surged to more than $27 a share. As the stock soared, Freeman sold more than $130mn worth of stock from his TD Ameritrade and Interactive Brokers accounts.
Freeman’s sale was well-timed. Shares in Bed Bath & Beyond tumbled more than 20 per cent on Thursday after the investor and meme-stock champion Ryan Cohen disclosed on Wednesday evening that he intended to sell his entire stake of almost 12 per cent in the company.
“I certainly did not expect such a vicious rally upwards,” Freeman said in an interview on Wednesday. “I thought this was going to be a six-months-plus play . . . I was really shocked that it went up so fast.”
After selling the shares, Freeman went for dinner with his parents in the suburb of New York City where they live and on Wednesday he flew to Los Angeles to return to campus, he said.
Freeman’s initial stake cost about $25mn, which he said was mostly raised from friends and family. He has invested for years with his uncle, Dr Scott Freeman, a former pharmaceutical executive. The two recently built an activist stake in a publicly traded pharmaceutical company called Mind Medicine.
Freeman also said he had interned for years at a New Jersey hedge fund, Volaris Capital. Just before his 17th birthday, Freeman and its founder, Vivek Kapoor, a former Credit Suisse executive, published a paper titled “Irreducible Risks of Hedging a Bond with a Default Swap”.
Freeman amassed his more than 6 per cent position in Bed Bath & Beyond via Freeman Capital Management, a fund registered in the cowboy town of Sheridan, Wyoming, according to the filings.
Upon disclosing his position in July, Freeman sent an uncompromising message to the retailer’s board. The company, he said, was “facing an existential crisis for its survival”. It needed “to cut its cash-burn rate, drastically improve its capital structure, and raise cash”, he added.
Shares of the New Jersey-based chain — known for operating cavernous stores full of vacuums, towels and kitchen gadgets — have risen fivefold over the past month even after the grim earnings report on June 29.
It reported sales had plunged 25 per cent in the second quarter compared with the same period of 2021, while its net loss widened to $358mn from $51mn. Its cash position had dwindled to $107mn from $1bn at the start of the year.
Bed Bath & Beyond is one of a handful of meme stocks that became popular at the start of 2021 but has garnered less attention than GameStop, the video game retailer chaired by Cohen, and AMC, the cinema chain.
The increase in its share price has been driven by interest from retail investors attracted by the stock’s small free float and a significant number of short sellers betting the share price will fall.
Those two characteristics tend to draw interest from retail investors frequenting Reddit forums. It means they can try to engineer a “short squeeze” by driving the share price higher and forcing professional investors to unwind their bearish positions, which only propels the stock even higher.
It was a separate disclosure on Monday from Cohen, who is also co-founder of pet food retailer Chewy, that sent the stock on a tear on Tuesday. He disclosed he had purchased a large number of call options in Bed Bath & Beyond — derivatives that can deliver a windfall if a stock rises in value.
Cohen did not respond to a request for comment.
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MindMed Co-Founder Dr. Scott Freeman Proposes Value Enhancement Plan
News provided by FCM MM Holdings, LLC
Aug 11, 2022, 08:08 ET
https://www.prnewswire.com
SHERIDAN, Wyo., Aug. 11, 2022 /PRNewswire/ -- Today, FCM MM HOLDINGS, LLC ("FCM") announced that it has sent a letter to the Board of Directors of Mind Medicine (MindMed) Inc. (NASDAQ:MNMD) (the "Company" or "MindMed") calling on the Board to adopt a new strategic plan proposed by FCM including: refocusing on its core drugs, cutting cash burn, and terminating MindMed's at-the-money equity offering. FCM is directed and managed Dr. Scott Freeman, co-founder and former Chief Medical Officer of MindMed, who has offered to provide MindMed his expertise as a director on MindMed's board.
As detailed in the letter, FCM believes MindMed has underperformed—operationally, financially, and strategically—as a direct result of management's lack of focus on its core drugs: MM-110 (18-MC) and MM-120 (LSD). FCM contends that MindMed can bring MM-120 to market in four years rather than seven to eight years, by re-classifying MindMed's Phase IIb study on MM-120 to a Phase III study. FCM also proposes that the Company reduce costs from forty-five million dollars per year to under twenty-five million dollars and that the unnecessary and dilutive at-the-money offering should be eliminated. By executing these proposals, FCM believes that MindMed can unlock significant long-term value for MindMed's shareholders.
FCM's large economic stake in MindMed reflects its convictions regarding MindMed's potential and gives it a strong interest in the success of MindMed.
The full text of the letter is available and can be downloaded at mindmed.zone/letter
About FCM
FCM is managed by Dr. Scott Freeman and represents an investment of 5.6% of MindMed's shares outstanding. Dr. Freeman's investment in MindMed is in excess of nineteen million shares or 4.51% of MindMed's outstanding shares. FCM's letter is additionally signed by Chad Boulanger. Chad Boulanger has an investment in over four million shares of MindMed or 1% of MindMed's outstanding shares.
FCM additionally represents other early investors in MindMed who all have a strong interest in seeing the long-term success of MindMed.
For additional disclosure relating to public broadcast solicitations please see mindmed.zone/disclosure
Media Contact
Jake Freeman
Executive President
FCM MM HOLDINGS, LLC
30 N Gould St. Ste R
Sheridan, WY 82801
Phone: 908-308-2381
Email: jake@mindmed.zone
