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SEC reportedly investigating GameStop (GME) Executive Chairman Ryan Cohen's 2022 BBBY trades

GameStop's Executive Chairman finds himself in the middle of an SEC investigation surrounding his trades of Bed Bath & Beyond shares in 2022.

Asif Khan

September 8, 2023 10:15 AM

COURTESY OF RYAN COHEN

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GameStop Executive Chairman Ryan Cohen is being investigated by the United States Securities and Exchange Commission over 2022 trades of Bed Bath & Beyond (BBBY) shares, according to a report. The activist investor is GameStop's largest shareholder and bought nearly 10% of Bed Bath & Beyond's common stock in March of 2022 before dumping the position five months later.

At least her cart is full 🌝

— Ryan Cohen (@ryancohen) August 12, 2022

Just one week before exiting his position in the now bankrupt Bed Bath & Beyond (BBBYQ). Cohen had replied to a CNBC article tweet about the retailer's troubles with the statement that "at least her cart is full." Cohen is on the record stating in a court filing that his company RC Ventures liquidated their BBBY stake because the stock "unexpectedly increased to a value that exceeded what [he believed] it was worth." Wall Street Journal was the first to report the news of this SEC probe into Cohen's BBBY trades.

Ryan Cohen's RC Ventures made a profit of nearly $60 million on the BBBY position. While it is hard to ignore the fact that his involvement in BBBY drew more attention to the stock, and could have potentially affected short-term price fluctuations of the stock, the SEC is going to have to prove more than just great timing on the trades to find evidence of securities fraud. The so-called "meme stock" investor revolution has seen many inexperienced investors gamble on stocks labeled "the next GameStop" and Cohen's 2022 trades in BBBY certainly were a distraction for a lot of people who treat every word from him as gospel. 

pic.twitter.com/hwSgrHjHMx

— Ryan Cohen (@ryancohen) January 18, 2023

This becomes especially tricky when Ryan Cohen tweets cryptic nonsense or jokes that can be construed to mean just about anything. When I wrote an article stating that Bed Bath & Beyond's (BBBY) bankruptcy is a blessing for GameStop (GME) investors earlier this year, I mentioned that Cohen's actions did lead a bunch of people into BBBY, but many of those followers did not exit when RC Ventures did and began to fabricate stories of impending acquisitions that would bail them out. Is it his fault that people have poor reading comprehension and have continued to gamble on a stock with deteriorating fundamentals? There are still people trading BBBYQ shares hoping for a white knight to save them from being completely wiped out.

Applying a "diamond hands" never-sell approach is not a great investment strategy when a company is truly at risk of bankruptcy. Bed Bath & Beyond's board of directors did not help their shareholders when they did not raise any capital during last year's run up in share prices. Contrast that with GameStop management's timing of their capital raises in 2021, and it is pretty clear why one of the retailers is still in business while the other one has a stock that is set to become worthless by the end of the month.

Trading Day 89 of not selling BBBYQ…with 🎶🦁💃🏾🧸🕺🏼🦁🎶 Happy Friday homies from a very happy motor city 🦍
byu/Tronowitz inBBBY

The destruction of capital at Bed Bath & Beyond in the late summer of 2022 lead to the death of the company's CFO Gustavo Arnal. Mr. Arnal's death has been ruled a suicide and occurred just weeks after he and the company were sued for participating in alleged "pump and dump" scheme. If BBBY shareholders were unable to see how the company's CFO jumping out of a building could be viewed as bad news for the stock's prospects, it is not surprising that they ignored all evidence that Ryan Cohen no longer had any interest in the company.

GameStop (GME) shares are down 7% today largely due to this bad news about Executive Chairman Ryan Cohen. The company's most recent earnings report actually did beat Wall Street analyst expectations, but the stock was unable to hold onto its after-hours trading gains, and is heading to a down week largely due to news that has nothing to do with the company. Only time will tell if today's price drop in GameStop shares are an overreaction or if Ryan Cohen's BBBY trades in 2022 will be a cloud overhanging the company until the SEC probe concludes. Maybe this news of an SEC investigation explains why Ryan Cohen and GameStop did not host an earnings conference call this quarter.

This article is only meant for educational purposes, and should not be taken as investment advice. Please consider your own investment time horizon, risk tolerance, and consult with a financial advisor before acting on this information.

Full Disclosure:

At the time of this article, Shacknews primary shareholder Asif A. Khan, his family members, or his company Virtue LLC had the following positions:

Long GameStop via GME shares (partially hedged with in--the-money put options)

Asif Khan

CEO/EIC/EIEIO

Asif Khan is the CEO, EIC, and majority shareholder of Shacknews. He began his career in video game journalism as a freelancer in 2001 for Tendobox.com. Asif is a CPA and was formerly an investment adviser representative. After much success in his own personal investments, he retired from his day job in financial services and is currently focused on new private investments. His favorite PC game of all time is Duke Nukem 3D, and he is an unapologetic fan of most things Nintendo. Asif first frequented the Shack when it was sCary's Shugashack to find all things Quake. When he is not immersed in investments or gaming he is a purveyor of fine electronic music. Asif also has an irrational love of Cleveland sports.