<< Read Part 1: If You Can’t Spot The Sucker…

Image Source: Unsplash

By: Steve Sosnick Chief Strategist at Interactive Brokers

Sometimes it doesn’t feel great to be correct, and it’s rare to be proven correct so quickly. 

We published an important piece around noon on Thursday, August 18^th, 2022, before we knew that Ryan Cohen had disposed of his BBBY shares a day earlier. We now know the outcome of something we wondered in the piece: “We don’t yet have a way to know how many shares might have been sold into the final paroxysm of [Wednesday’s] move.” As we learned after the close yesterday, the answer was “all”.

As we learn from yesterday’s SEC 13D filing, he actually began selling on the 16^th. This is interesting because the 144 filing with his intention to sell was dated the 16^th. This means that the selling likely began almost immediately after the filing was accepted by the SEC since he managed to sell over 3.7 million shares on that day. 

Over the two-day period, his stock sales ranged from $18.6848 to $29.2192.If you use the Scale Trader function on your TWS, hopefully, all your sales go this well:

(Click on image to enlarge)

Source: SEC

Without the immediate knowledge of Mr. Cohen’s potential sale, BBBY shares closed about 11.7% higher on the 17^th.  This episode was a master class in how to manage SEC filings. When buying stock or options, notify the market as quickly as possible. When selling, utilize filing methods that offer the ability to obfuscate your intentions for a crucial session or two. The moves may be legal, but they are certainly unseemly. (This escapade certainly seems worthy of SEC attention if they are sincere about their role in protecting individual investors.)

Oh, one more important thing: we learned late yesterday that BBBY hired Kirkland & Ellis as a restructuring advisor[i]. Healthy companies don’t need to hire restructuring advisors. One has to question whether a 10% holder of a company’s shares had no knowledge of impending problems. 

Now that the dust has settled, it’s painfully obvious that an investor with a massive social media following utilized his ability to generate excitement in meme stocks to turn a losing position into a winner at the expense of unsuspecting shareholders. It pains me to say it, but an untold number of investors, blinded by greed, fell victim to the machinations of a potentially unscrupulous operator. Yet still, not all the players have left the table. Given the role that Ryan Cohen played in what seems akin to a pump and dump scheme[ii], one might think that GameStop, another company in which he holds almost 12% of the stock, would be suffering mightily. But those shares are only down about 7%. Even after getting suckered, it appears that not everyone has left the table.

[i] Full disclosure, my nephew is a restructuring attorney at Kirkland & Ellis. We have not discussed this matter.

[ii] “Seems akin” – I can’t make an accusation of illicit activity without proof

More By This Author:

If You Can’t Spot the Sucker…
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