What happened
Shares of Bed Bath & Beyond (NASDAQ: BBBY) soared 34% on Monday after billionaire Ryan Cohen took a large stake in the company.
So what
Cohen purchased 9.8% of Bed Bath & Beyond's stock via his investment firm, RC Ventures. The founder of online pet retailer Chewy and chairman of video game chain GameStop wants the home goods company to rein in what he sees as excessive compensation for its underperforming executives. He'd also like to see it streamline its turnaround efforts.
"We ... doubt the company can simultaneously buy back shares, cut expenses, invest in its infrastructure and growth, launch new offerings, and meet customer demand for core goods," Cohen said in a letter. "This plan, at least in its present form, does not seem viable."
Additionally, Cohen believes Bed Bath & Beyond should consider spinning off its Buybuy Baby chain, as well as explore a sale to a private equity buyer.
Ryan Cohen thinks he has solutions for Bed Bath & Beyond's lagging home goods sales. Image source: Getty Images.
Bed Bath & Beyond, for its part, said it would consider Cohen's recommendations.
"Bed Bath & Beyond's board and management team maintain a consistent dialogue with our shareholders and, while we have had no prior contact with RC Ventures, we will carefully review their letter and hope to engage constructively around the ideas they have put forth," the company said in a press release.
Now what
Cohen's popularity soared after he took a stake in GameStop in late 2020. The news sparked a staggering rally in the heavily shorted company's shares and helped to ignite interest in so-called meme stocks among investors.
Yet it remains to be seen how much of an impact Cohen will have on Bed Bath & Beyond's operations and turnaround strategy. So, while today's sharp gains signal investors' excitement for what Cohen could help to bring about, the rally could prove short-lived if the retailer fails to implement any of his suggestions.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns and recommends Chewy, Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
