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Bed Bath & Beyond investor Ryan Cohen is the 'pied piper of meme stocks': Strategist

Interactive Brokers Chief Strategist Steve Sosnick joins Yahoo Finance Live to discuss the wild week for Bed Bath & Beyond and investor Ryan Cohen exiting all of his shares of the company.

Video transcript

DAVID BRIGGS: Let's dive deeper into this wild week with meme stocks and talk to Steve Sosnick, Chief Strategist at Interactive Brokers. Steve, this has been a really frustrating week if you are an investor watching the action of Ryan Cohen taking home $68 million on this. And as Jared mentioned, 44% down for Bed Bath & Beyond today. Please make sense of what we're seeing, or at least try to, sir.

STEVE SOSNICK: I'll do my best to try to make sense of it. It's a tough one. In Jared's chart that he showed a moment ago, we saw sort of that first spike in March, and that was when Ryan Cohen entered his position. He paid about $15 and change, I think about $15.35 plus or minus a few cents here and there.

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And the stock leaped right afterwards because the news was that he was in. And he is sort of the, I'm going to call it the Pied Piper of meme stocks between his success with Chewy and his successes with GameStop and getting that one moving. But since then, the stock has really been lousy until recently.

It was trading about $5 a share. Normally, if the rest of us have a stock that we paid $15 and change for and it's trading around $5 and change, we have a tough decision. We either have to eat it, or we have to see whether to double down, et cetera, like that. When you have a huge meme following, you can buy more options, get people excited, create excitement. And unfortunately, for many of the people who got caught up in the excitement, he then used that excitement to sell, and that's what we're seeing now.

And on top of it, the last piece of news that came out was they've hired a restructuring attorney. Healthy companies don't hire restructuring attorneys. That's a tough sign. So all in all, this is a tough week because a lot of people got caught up in the enthusiasm. Greed is a powerful motivator when you see a stock going up like that. But to a certain extent, I think there was someone who-- there was someone who was a bit ahead of the game on that.

SEANA SMITH: And Steve, in your notes that you sent over, you said that this episode was a masterclass in how to manage SEC filings. Do you think the losses that we saw this week, is it going to change, I guess, investor behavior going forward? Because we've seen this play out before, similar to what we saw in GameStop.

Many, many retail investors lost all of their savings, everything they put into that name. Yet we're still seeing excitement in these plays that don't have a great business model. So what do you think that action is going to look like going forward?

STEVE SOSNICK: Hope springs eternal, right? I mean, if we look at the fundamentals of any of the classic meme stocks, the GameStop, the AMC, the Bed Bath & Beyond, the fundamental stake, the companies, if they do make money, don't make much of it, certainly not in any sort of way that justifies their valuation. And so people-- those who are in it are going to be loathe to get away from the game.

To me, it's fascinating that GameStop is only down 7% today because if you know that Ryan Cohen is sort of the guy behind GameStop as well and he just sort of ran roughshod over a lot of the shareholders in Bed Bath & Beyond, to me that would say, I really don't want to be a part of this anymore. But if you're committed to the games-- if you're committed to the meme, I guess you remain committed to the meme.

I think it's-- for the average person watching, I think this is a very specialized field, and it's more akin to gambling than investing. And so if you choose to do that, do it with your eyes open. I prefer to talk about investment and companies that are making money and things of that nature.

DAVID BRIGGS: Or just gamble because, quite frankly, at least there's some knowledge there with teams, at least sports gambling, at least you're basing it on some fundamental knowledge. So Seana mentioned the SEC. Should the SEC have the final word here? It sounds like things aren't necessarily all on the up-and-up, at least it looks it from the outside.

STEVE SOSNICK: I got to tread a little carefully with this one, but what I'm going to say is if-- the SEC's mandate is to protect the individual investor. Certainly, a lot of individual investors got walloped this week, and largely due to the machinations of one very-- one corporate insider. It's not all his thing, but he got-- he certainly was the main beneficiary.

And so I would like to think that the SEC was take-- would at least be taking a sniff around at this. I don't know that any laws were broken. I certainly am not going to allege that on television. But even so, he did use filings, and I have every reason to believe his lawyers were advising him properly on how to utilize the filings. But the SEC, at least, has to make a cursory look into this thing if they're sincere about their job of protecting average individuals in the market.

SEANA SMITH: And Steve, it's interesting because we've seen sort of different reactions from heads of these companies that have been considered meme stocks or have been mentioned multiple times on Wall Street Bets. AMC's CEO was one of the leaders who has come out cheering for the fact and really supports the fact that his company is a meme stock.

I guess if you're one of these investors looking to get into this trade-- I know you're saying it doesn't make sense. You wouldn't do it. I wouldn't advise people to get into it because you're right, it is like gambling. But what do you make of the different comments that we've heard from executives of these companies recently?

STEVE SOSNICK: Well, early on, I actually sort of gave begrudging respect to Adam Aron at AMC because he embraced the meme but in a constructive way. Yes, you can embrace the meme as a way to enrich yourself for your stock. I actually think he took some-- he took some steps to put his company on sounder footing.

He sold-- he sold shares at the highs, not to necessarily-- not always his own shares, but to shore up the firm's balance sheet. So, you know, again, AMC is far from the ideal investment, but I do-- I do have to say that, in his case, he's at least taken, I think, a greater effort-- made a greater effort to use his meme status to improve the balance sheet and the management and the prospects of his company. It's still a heavy lift, but I give him-- I give him points for trying.

DAVID BRIGGS: And Steve, finally, back to Bed Bath & Beyond, is there any reason to believe fundamentally in a turnaround story coming?

STEVE SOSNICK: You know, it's funny. This week-- the first things I talked about Bed Bath & Beyond was actually via Twitter with your colleague Brian Sozzi, and he had, like, these dire pictures of empty Bed Bath & Beyonds on Long Island, which, to me-- my dad was a retail analyst, and I used to have to go to a lot of stores and count shopping bags and things like that. And the last thing you want to see in a store that has most of its business in back to college is an empty back-to-college section.

And it didn't look like the back-to-college section was empty because it was sold out. It looked like they just hadn't gotten deliveries or whatever. Again, the fact that they hired a restructuring attorney-- full disclosure-- my nephew actually works for that firm, but he and I have not discussed it-- but that's never a good sign. You don't see healthy companies hiring restructuring attorneys. They might high-- they might hire consultants. They don't hire people who need to help them restructure their debt or get their operations into more sound order.

SEANA SMITH: Steve Sosnick, thanks so much for breaking down what has been a very confusing week as we wrap up the trading action here in the final hour of trading with the meme stocks. Steve Sosnick, always great to see you.