(BFM Bourse) – Jake Freeman has invested in home goods group Bed Bath and Beyond. He took his winnings at the opportune moment, as the company subsequently saw its share price plummet.
He is not yet old enough to drink alcohol in the United States, but he already has the seed of Warren Buffett in him. Jake Freeman, a 20-year-old American student at the University of Southern California, won $110 million betting on Bed Bath and Beyond. This American company specializes in the marketing of items for the home, such as doormats, blankets, household appliances, towels, cushions, etc.
The young man acquired on July 20, via his company Freeman Capital Management, a total of 4.97 million shares of this group. According to FinancialTimes, which revealed the story of this stockbroker, Jake Freeman bought all of his shares at less than 5.50 dollars a share, paying around 25 million dollars. To raise such a sum, the student assures the “FT” that he has raised funds from his family, friends and other people around him.
He took it well since the Bed Bath and Beyond action subsequently took off, multiplying by more than 5 its course. This rise was driven by a massive influx of retail investors deciding on the Reddit social network to band together to boost the stock and overthrow short sellers. This type of pattern had already occurred during the pandemic with the GameStop video game store chain.
A simple strategy
A statement to the SEC, the US stock market watchdog, shows that the student sold his position on August 16. Total amount of the sale: more than 130 million dollars, according to the “FT”, for a capital gain which therefore reaches approximately 110 million dollars, or 110 million euros.
“The strong appreciation of the BBBY share price [Bed Bath and Beyond, NDLR]combined with the fact that I’m leaving for college tomorrow, played a vital role in closing this [sa] position”, explained Jake Freeman on Reddit, just after being relieved of his titles.
The student thus applied the most basic strategy there is on the stock market: buy when the action is low and sell when it has risen a lot.
The young investor nevertheless told the “FT” that he did not expect the title Bed Bath and Beyond to climb so quickly. “I thought it would be a bet for more than six months, I was really shocked that it went up so quickly,” he insists.
Jake Freeman had a hollow nose as the US retailer’s stock subsequently crashed, falling to $11. In question, the announcement of the sale of shares and options on the title by the American billionaire Ryan Cohen, president of GameStop. The businessman, who invested through his RC Ventures holding company, also pocketed a nice capital gain of $68.1 million by closing his position.
Strong potential
As Business Insider reports, Jake Freeman explained in a Twitter Spaces conversation that he invested in Bed Bath and Beyond because he believed the stock price reflected expectations of bankruptcy. The young investor considered this outcome avoidable and thus thought that the title had great potential, provided that the management of the company applies the right measures to strengthen its financial structure.
In the wake of his stake in Bed Bath and Beyond, the student even took the liberty of writing a missive to the company, in great financial difficulty, suggesting ideas for raising the bar. “BBBY is facing an existential crisis for her survival,” he wrote. Jake Freeman had suggested to the American group to set up a complex financial scheme based in particular on issues of bonds convertible into shares to strengthen its balance sheet.
The mechanism was to allow the company to capitalize on its status as a “meme stock” – that is, a value prized by individual investors – to reduce its debt by half.
“I continue to see a lot of value in BBBY and lots of ways for BBBY to avoid bankruptcy,” he said on Reddit after selling his titles.
Bad Beth and Beyond has not yet filed for bankruptcy. On Thursday, The Wall Street Journal reported that the company was in advanced talks with an asset manager, Sixth Street Partners, to secure a $400 million loan and bolster its liquidity.
Soon at the White House?
Apart from this obviously high-profile coup, Jake Freeman presents a very singular profile. The young man learned the basics of investing in the stock market from his uncle, Scott, a former senior executive in the pharmaceutical industry, from the age of 13, reports the Financial Times. He also completed internships from the age of 17 in a hedge fund (a speculative fund) in New Jersey, Volaris. The student has also co-signed with the founder of this company, Vivek Kapoor, an academic study. They would now learn Sanskrit, an ancient Indo-European language, together.
Still according to the “FT”, Jake Freeman had even tried to run for the 2020 US presidential election, wishing to become the youngest candidate for this election. His attempt hadn’t gone very far. With his new notoriety, will he try the experience again in 2024?
Julien Marion – ©2022 BFM Bourse