(PatrioticPost.com)- Last week, a college student raked in over $100 million after selling his shares in Bed Bath & Beyond at the peak of a meme stock craze.
Meme stocks are shares of a company that get hyped in online communities that, through a coordinated effort, drive the price of stock up.
Between July 18 and noon on August 16, the stock price for Bed Bath & Beyond skyrocketed from $4.96 to $27.21, marking a 449% increase as traders on social media began coordinating to buy shares.
Enter USC applied mathematics and economics student, Jake Freeman. Using $25 million he raised from friends and family, Freeman purchased 5 million shares in Bed Bath & Beyond when the price was $5.50. And just before the stock price began to decline as meme stocks so often do, Freeman dumped the entirety of his stake, earning him $110 million.
In a post on Reddit last Tuesday, Freeman boasted that his acquisition was a “watershed moment” for Bed Bad & Beyond that might enable the company “to capitalize off of this increased price to realign their balance sheet.” He said he would miss being able to boast that he was Bed Bath & Beyond’s second-largest non-institutional shareholder, but added that he would “certainly” be shopping at Bed Bath & Beyond on Wednesday.
While Freeman made off like a bandit, many institutional investors suffered heavy paper losses. Those with short positions lost $662 million over the last month, including a $218 million loss last Tuesday.
Freeman meanwhile celebrated his windfall by taking his parents out to eat. He told Financial Times he hadn’t expected “such a vicious rally upwards” believing instead it would be a six-month play. “I was really shocked that it went up so fast.”
Short sellers bet against a company by borrowing shares, selling them on the stock market, and buying back the shares later to the original owners. This strategy results in a profit if the company’s stock price declines.