The wild world of cultish "meme" stocks is getting even wilder.
This is a world where logic takes a back seat to emotion. I've seen no better example of this than Thursday's after-hours action in Bed Bath & Beyond (BBBY) .
Bed Bath & Beyond lost 19.5% during Thursday's regular session, on news that Ryan Cohen, chairman of GameStop (GME) , planned to sell his entire position in the home goods retailer.
Cohen's venture capital firm, RC Ventures, held 9.45 million shares, equating to a stake of over 10%. That's a lot of supply to dump on the market, and a definite negative for the stock's price.
It would also mark the exit of Bed Bath & Beyond's most visible cheerleader. Cohen, who is also the co-founder of pet-focused retailer Chewy (CHWY) , gave Bed Bath & Beyond a huge boost in March when he became an activist investor in the company.
News that Cohen planned to sell his entire stake in Bed Bath & Beyond led to Thursday's regular-session decline. After the close, the stock plunged again when it was revealed that RC Ventures had already sold those shares. This additional selloff made no sense, as the overhang of supply had already been removed from the market.
Traders knew on Thursday morning that Cohen no longer believed in the stock, so why would they wait until after Thursday's close to sell? The stock dropped from $18.55 at the close to $10.50 in after-hours trading.
Bed Bath & Beyond has a lot in common with GameStop. Both companies are basically obsolete.
GameStop is the Blockbuster Video of gaming, a physical store in an online world. The idea of going to a physical location to buy a video game is something that would never occur to many young people today.
Bed Bath & Beyond is a mall-based retailer in an age of dying malls. The company's cash position has declined from $1.1 billion to $108 million over the past year.
If Cohen was such a big believer in Bed Bath & Beyond, why did he hold his shares for less than six months? Did he realize that when he threw his weight behind the retailer, he'd turn it into a meme stock? If he truly believed in the company, why was he so quick to sell?
If you're going to trade names like GameStop, AMC Entertainment (AMC) , and Bed Bath & Beyond, know that you're dealing with highly emotional investors. Expect the unexpected, and you won't be disappointed.
