Bed Bath & Beyond slides after Ryan Cohen files for stake sale

© Reuters. A person exits a Bed Bath & Beyond store in Manhattan, New York City, U.S., June 29, 2022. REUTERS/Andrew Kelly/File Photo

By Medha Singh and Aishwarya Nair

(Reuters) -Bed Bath & Beyond Inc shares nosedived late in the session on Wednesday from a 45% surge earlier after investor and GameStop (NYSE:GME) Chairman Ryan Cohen filed for a proposed sale of his stake in the home goods retailer.

The shares continued their slide after the bell and were down more than 15% as Cohen's venture capital firm RC Ventures, the second largest investor, said it intends to sell 9.45 million shares, including options, through JP Morgan Securities.

The company did not immediately respond to a request for a comment, while RC Ventures could not be reached.

The move comes a day after the firm bought call options expiring in January 2023 on 1.67 million shares with a strike price ranging from $60 to $80 even as Bed Bath & Beyond (NASDAQ:BBBY) struggles with declining revenue and liquidity concerns.

Cohen's bets led to the highest single-day purchase of the company's shares in at least five years, with individual investors dabbling in highly shorted shares buying $73.2 million worth of shares in the previous session.

On Wednesday too, Bed Bath & Beyond was the most actively traded single stock option, far ahead of popular options trades including Apple Inc (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA) Inc, data from Options Clearing Corp showed.

The resurgence in retail trading comes after a rebound in U.S. stocks that helped the S&P 500 recoup more than half of the benchmark's losses since its June low.

Bed Bath & Beyond has been gaining in 14 out of the last 15 sessions, helping the company's market value rise fourfold to more than $2 billion. On Wednesday, the shares rose up to $30 and closed down at $23.08.

"It truly is a quality company (but) shares are probably overvalued in the low teens and it is ridiculously overvalued at high $20s," said Jake Dollarhide, chief executive at Longbow Asset Management in Tulsa, Oklahoma.

The stock had lost more than 60% of its value in June and July. About 55% of Bed Bath & Beyond's free float is shorted, an increase of 19% in the past 30 days despite the price surge, according to S3 Partners.

"It's possible for the meme rally to spread since there is a lot of short-term capital entering the market. We've seen the same with Chinese meme stocks over the past few weeks," Siddharth Singhai, chief investment officer at New York-based hedge fund Ironhold Capital.