the money game

Beware Ryan Cohen, the Meme-Stock King

Illustration: Zak Tebbal

Right before Labor Day weekend, Gustavo Arnal, the chief financial officer of Bed Bath & Beyond, jumped to his death from the “Jenga Building,” Tribeca’s tallest skyscraper. Arnal reportedly did not leave a note, but his plunge came a day after he closed a $500 million deal to shore up the ailing retailer. Bed Bath & Beyond, teetering on the brink of bankruptcy, had announced just days before that it would cut 20 percent of its staff and close 150 stores. There was one other wrinkle to the mystery of Arnal’s death: a perfectly timed $1.4 million stock sale at the peak of a surge in Bed Bath & Beyond’s stock in August, a frenzy initiated by a 37-year-old Florida man named Ryan Cohen — which had instigated a class-action lawsuit alleging that Arnal and Cohen had conspired to pump and dump shares of the company.

They made an odd couple. Arnal was a Fortune 500 veteran who had spent most of his career at the multinational Procter & Gamble; colleagues reportedly remembered him as a straitlaced professional and workaholic. Cohen, by contrast, has emerged in recent years as Wall Street’s meme-stock king, posting and trolling his way — one poop emoji at a time — to becoming the Reddit version of a populist hero. It’s not clear what relationship Arnal and Cohen had, if any (there is reportedly no record of private communications between them), but it was hard to dismiss as mere coincidence the fact that both men had profited from Cohen’s stockfluencer brand of YOLO investing.

The tragic consequences of Bed Bath & Beyond’s whiplashing fortunes have cast an even darker cloud over Cohen’s reputation. But in all likelihood the meme-stock phenomenon is here to stay — even if Cohen and his ilk are profiting off the backs of the “apes” who support them.

“Why waste money on college when Wikipedia is free?” Cohen tweeted in late January, along with a pornographic image from the Wikipedia page for the sex position 69. Cohen that day had scooped up another quarter-million shares of Bed Bath & Beyond. The purchase added to a stake that at its height was worth in excess of $175 million and made Cohen one of the coupon-loving big-box chain’s largest shareholders. In March, the company added three of Cohen’s director picks to its board.

It appeared that Cohen, the billionaire founder of Chewy, the “Amazon for pets,” was using the same playbook he’d applied to the video-game retailer GameStop. In early 2021, Cohen led an activist campaign to resurrect the company’s left-for-dead stock, inspiring retail investors on Reddit to send its share price soaring and, in the process, blowing up a hedge fund or two that had shorted GameStop. With Cohen’s investment, Bed Bath & Beyond had officially become a meme stock.

After an initial pop on the news of Cohen’s involvement, its share price sank back down, dipping below $5 in July. But in August, when Cohen had to redisclose his position in Bed Bath & Beyond owing to a change in the company’s total amount of shares, the apes on Reddit interpreted it to mean Cohen had gone bullish again on the company — despite the fact that he hadn’t traded any shares in months. The filings once again showed that Cohen owned far-out-of-the-money call options on Bed Bath & Beyond, essentially wagering that the stock would soar above $80. It was old news, but Bed Bath & Beyond stock jumped 70 percent following the disclosures.

Retail investors had played right into Cohen’s hands. By the end of the following day, he had sold all of his stock, according to a subsequent filing. The revelation sent the company’s stock crashing, while Cohen walked away with a $68 million profit.

Now, some investors are wondering if Cohen had planned this from the beginning — exploiting his reign as meme king to execute what critics are calling a pump-and-dump scheme. The out-of-the-money options struck investors as particularly suspicious. “Why are you buying $80 calls with the stock under $20 if you’re not looking to manipulate the stock?” says Marc Cohodes, a famed short-seller.

It’s hard to allege Cohen committed a securities violation on the basis of simply making accurate regulatory disclosures and legally selling stock on the open market — which has made many on Wall Street all the more upset. “The way he did it reeks of a pump and dump, just reeks of it,” says Whitney Tilson, the CEO of Empire Financial Research, who filed a complaint with the SEC alleging Cohen engaged in securities manipulation through a pump-and-dump scheme. “This has been going on for forever — Ryan Cohen just came up with a clever, innovative, nefarious twist.”

In the days following Cohen’s sale, however, the true extent of Bed Bath & Beyond’s woes became clear. “I think it’s highly problematic for Ryan Cohen to place individuals on the board, dump all of his shares, and then the next day we learn that Bed Bath & Beyond has hired restructuring experts and now they’re engaged in some financial difficulties,” says Daniel Taylor, a Wharton professor who specializes in fraud.

And then Arnal threw himself off a tall building. The suit that names the pair does not appear to be particularly threatening. (The plaintiff, for one, is an immigration lawyer who was representing himself when he filed it.) A Bed Bath & Beyond spokesperson said Arnal’s stock sales “were part of a preset plan” arranged in April, though they were the only ones he made all year other than for tax purposes. Still, there are questions about whether Cohen received a heads-up that led him to get out in the nick of time. When the markets reopened the Tuesday after Labor Day, Bed Bath & Beyond stock fell 18 percent.

The more respectable players in the market have turned on Cohen. “He has absolutely destroyed his reputation,” says Tilson. They are also questioning whether he’s the business savant many believe him to be. “There’s a lot of people who sold a lot of things for a lot of money who I wouldn’t trust walking a fucking dog,” says Cohodes. “It’s not like this guy’s Warren Buffett.

Since GameStop, Cohen, who is the chairman of that company’s board, has not given any interviews. (Cohen did not respond to repeated requests for comment on this story.) The company’s earnings calls, consisting of executives reading from a script, have become more like “hostage videos,” says Wedbush gaming analyst Michael Pachter. “The biggest change he’s made is utter lack of transparency,” says Pachter, who has switched from a “buy” to a “sell” rating on GameStop stock. Meanwhile, GameStop has lost more than half its market value over the past year. Last holiday season — historically, a profitable period for GameStop — the chain reported a loss for the first time ever, according to Pachter.

So far, says Pachter, the cornerstone of GameStop’s business under Cohen seems to be an NFT marketplace, which it launched in July a week after announcing layoffs. “When Ryan Cohen says we’re going to do an NFT exchange at GameStop, that is like McDonald’s saying, ‘We serve 50 million people a week hamburgers; let’s start selling them groceries,’ ” says Pachter.

What Cohen has done is meme. In the absence of any articulated strategy, Reddit looks for clues to Cohen’s thinking in his bathroom humor and obscene GIFs featuring boners. One particularly picked-over tweet, the first item Cohen posted following GameStop’s meme-driven stock peak in early 2021, was an image of a McDonald’s soft-serve cone with a toad emoji.

Cohen’s tweets likely have no underlying meaning. But he has managed to cultivate a social-media persona that’s expertly choreographed for the meme-stonk age, a Musk-like aura that combines an air of mystery with Reddit-tailored references that pander directly to the apes. He’s convinced throngs of retail traders he’s a genius even while he’s betrayed them, leaving them holding the bag of a worthless stock. As long as people like Cohen and Musk are able to do that, then there’s no telling what they can do to the market or who can stop them, besides the apes themselves.

Beware Ryan Cohen, the Meme-Stock King