Erste Asset Management

The Meme Stocks Are Back: Bed Bath & Beyond in the Spotlight After Price Rollercoaster

The Meme Stocks Are Back: Bed Bath & Beyond in the Spotlight After Price Rollercoaster
The Meme Stocks Are Back: Bed Bath & Beyond in the Spotlight After Price Rollercoaster
Share post:

The “meme stocks” on the stock markets are back in the spotlight – shares of comparably little-known second-line stocks that are driven to astronomical heights by speculative retail investors through concerted buying campaigns on social media. While AMC and Gamestop were the two stars of the first meme stock wave in the previous year, Bed Bath & Beyond in particular has recently made waves with a price action rollercoaster ride.

The retailer’s share price intermittently quadrupled in August, whetting many investors’ appetites for other small caps. The company is heavily indebted and, according to analysts, threatened with insolvency, but news about possible financing solutions fuelled bets on the stock.

Bed Bath & Beyond Plummets After Cohen Exit

The boom was quickly followed by a crash, however, with Bed Bath & Beyond’s stock plummeting by more than 50 per cent in a matter of days after it was announced that RC Ventures, the company owned by activist investor Ryan Cohen, had sold its entire stake in the home furnishing company for USD 178m.

Cohen’s entry into Bed Bath & Beyond in March had triggered a run on the beleaguered stock this year. Now the investor, considered a role model by young individual investors, has sold off his stake. According to calculations by the financial news agency Bloomberg, Cohen has made a profit of $68 million on his short-term exposure to the stock.

Retail and professional investors are now accusing the investor of price manipulation and are demanding consequences. For example, when Cohen announced that he had acquired call options to buy more Bed Bath & Beyond shares, he may have deliberately incited the interest of many investors in the share. On social media, retail investors interpreted the purchase as a sign that Cohen was betting on a rising share price and joined in with purchases.

Data as of Aug. 30, 2022; Note: Past performance is not a reliable indicator of the future performance of an investment.

Gamestop Rally Marks the Beginning of the Meme Stock Hype

For quite a while, Cohen was considered a meme stock hero. Last year, the investor and his company invested in the video game retailer Gamestop, where he also became a member of the board of directors. Meanwhile, an investor fan community grew on social media platforms such as Reddit, viewing this as a positive sign and believing that the share had great price potential. In concerted actions, the investors drove Gamestop shares upwards, causing massive losses for hedge funds.

With their purchases, the small investors forced the hedge funds to unwind their bets on a falling share price. This drove the shares even higher and cost the funds billions. The Gamestop share price multiplied several times in succession and collapsed several times. Of course, all this had little to do with fundamentals as the video game company suffered from declining sales and losses.

Scott Galloway, professor at the economics department of New York University, made a harsh comparison at the time: online brokers like Robinhood, which were popular with meme-stock traders, were the latest crack dealers, whose aim was to constantly trigger the release of the happiness hormone dopamine in their customers. They would do everything in their power to use game elements to constantly trigger new deals: “Transactions are celebrated with falling confetti. The broker app looks like a colourful interface from Candy Crush,” said Galloway. The new reality of home office working during the pandemic may have further bolstered the trend to gamble from home.

Manipulation Allegations Against Platforms and Ryan Cohen

Other stocks, such as those of cinema chain operator AMC Entertainment, also turned into a plaything for speculators organised on social media and retail-investor-oriented trading platforms in 2021. In view of the high turnover and price volatility, Robinhood and other trading platforms popular with traders introduced temporary trading restrictions for some meme stocks, drawing displeasure from the community. Numerous other online brokers such as E-Trade or TD Ameritrade, but also the the large asset managers Charles Schwab and Fidelity’s platforms, could no longer handle the deluge of speculators and pulled the plug, with the prices of affected shares partly crashing as a consequence.

According to a court ruling in August, Robinhood now faces market manipulation charges. Investors who suffered losses because of the restrictions may now have the green light to file a class action lawsuit. Whether the US Securities and Exchange Commission (SEC) will join the manipulation charges against Ryan Cohen remains to be seen, but many experts expect stock market regulators to generally impose stricter rules to regulate trading via social media and to protect retail investors.

For a glossary of technical terms, please visit this link: Fund Glossary | Erste Asset Management

Legal note:

Prognoses are no reliable indicator for future performance.


Legal disclaimer

This document is an advertisement. Unless indicated otherwise, source: Erste Asset Management GmbH. The language of communication of the sales offices is German and the languages of communication of the Management Company also include English.

The prospectus for UCITS funds (including any amendments) is prepared and published in accordance with the provisions of the InvFG 2011 as amended. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in conjunction with the InvFG 2011.

The currently valid versions of the prospectus, the Information for Investors pursuant to § 21 AIFMG, and the key information document can be found on the website under “Mandatory publications” and can be obtained free of charge by interested investors at the offices of the Management Company and at the offices of the depositary bank. The exact date of the most recent publication of the prospectus, the languages in which the key information document is available, and any other locations where the documents can be obtained are indicated on the website A summary of the investor rights is available in German and English on the website and can also be obtained from the Management Company.

The Management Company can decide to suspend the provisions it has taken for the sale of unit certificates in other countries in accordance with the regulatory requirements.

Note: You are about to purchase a product that may be difficult to understand. We recommend that you read the indicated fund documents before making an investment decision. In addition to the locations listed above, you can obtain these documents free of charge at the offices of the referring Sparkassen bank and the offices of Erste Bank der oesterreichischen Sparkassen AG. You can also access these documents electronically at

N.B.: The performance scenarios listed in the key information document are based on a calculation method that is specified in an EU regulation. The future market development cannot be accurately predicted. The depicted performance scenarios merely present potential earnings, but are based on the earnings in the recent past. The actual earnings may be lower than indicated. Our analyses and conclusions are general in nature and do not take into account the individual characteristics of our investors in terms of earnings, taxation, experience and knowledge, investment objective, financial position, capacity for loss, and risk tolerance.

Please note: Past performance is not a reliable indicator of the future performance of a fund. Investments in securities entail risks in addition to the opportunities presented here. The value of units and their earnings can rise and fall. Changes in exchange rates can also have a positive or negative effect on the value of an investment. For this reason, you may receive less than your originally invested amount when you redeem your units. Persons who are interested in purchasing units in investment funds are advised to read the current fund prospectus(es) and the Information for Investors pursuant to § 21 AIFMG, especially the risk notices they contain, before making an investment decision. If the fund currency is different than the investor’s home currency, changes in the relevant exchange rate can positively or negatively influence the value of the investment and the amount of the costs associated with the fund in the home currency.

We are not permitted to directly or indirectly offer, sell, transfer, or deliver this financial product to natural or legal persons whose place of residence or domicile is located in a country where this is legally prohibited. In this case, we may not provide any product information, either.

Please consult the corresponding information in the fund prospectus and the Information for Investors pursuant to § 21 AIFMG for restrictions on the sale of the fund to American or Russian citizens.

It is expressly noted that this communication does not provide any investment recommendations, but only expresses our current market assessment. Thus, this communication is not a substitute for investment advice, does not take into account the legal regulations aimed at promoting the independence of financial analyses, and is not subject to a prohibition on trading following the distribution of financial analyses.

This document does not represent a sales activity of the Management Company and therefore may not be construed as an offer for the purchase or sale of financial or investment instruments.

Erste Asset Management GmbH is affiliated with the referring Sparkassen banks and Erste Bank.

Please also read the “Information about us and our securities services” published by your bank.

Subject to misprints and errors.

Leave a comment Required fields are marked with *

Your email address will not be published. Required fields are marked *