Study of BBBY
08/16/2022
Bed Bath & Beyond soars 70% as meme traders talk up Ryan Cohen’s call options purchase
Bed Bath & Beyond: Massive Short Squeeze Could Be Coming Soon
GameStop: Ryan Cohen’s Next Chewy
BBBY is “Ryan Cohen’s Next Chewy” seekingalpha.com/… – the Sequel.Although Ryan Cohen proposed for a sale or spin-off of BuyBuy Baby in his March activist letter to the BBBY board, his real gameplan is probably to unveil that BBBY can generate more value by retaining the crown jewel BuyBuy Baby, and not spinning it off immediately and certainly not selling it outright. Refining it into Ryan Cohen’s Chewy model of delighting customers in BuyBuy Baby’s passionate customer segment and further digitizing and seizing greater market share. BuyBuy Baby is a growth business that can accelerate its growth tailwinds with the Ryan Cohen magic applied and have the subsequent aura of a Chewy-like revenue multiple. Likewise, BBBY’s valuation multiple would re-rate higher thanks to BuyBuy Baby. It could do a partial spin-off in time, not a full spin-off in the near term which would not bring a suitable valuation.Meanwhile, the core Bed Bath is more like GME in the late 2010s era, that is, what GME during the 2010s could have been if only it had been managed properly. Namely, a declining business but one that with the right long-term steward (and rid of the agency problem) can be optimized and reduced for consistent profitability during its fixed tenure. Bed Bath is the core but BuyBuy Baby is the lead here. Perhaps there is a path in time too of BuyBuy Baby’s delighted customers driving a revival in Bed Bath.BBBY’s debt looms over like a sword of Damocles due to previous bad decisions but it should be clear how this is settled. Thanks to Ryan Cohen, as BBBY’s share price goes higher and the plans for BuyBuy Baby are unveiled, equity fund raising and/or convertible debt at a much higher stock price will resolve the debt issue.Of course, there is the very high short interest dynamics in the stock too that plays in as well.How do we get to above $60 and $80 in five months to January where Ryan Cohen’s call options will be in the money (as, by his second options purchase, he clearly expects it will)? The above combination of his business progression, value accretive plans announced for BuyBuy Baby, rerating in valuation multiple and sentiment, drastic reduction in net debt, the persistent high short interest capitulating – is the pathway to how – in a nutshell.The mid single digits stock price that BBBY was at up till a fortnight ago was astoundingly low.
