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How a 20-year-old American student made $110 million on Wall Street

(BFM Bourse) – Jake Freeman has invested in home goods group Bed Bath and Beyond. He took his profits at the right time, as the company’s share price subsequently plummeted.

He’s not yet old enough to drink alcohol in the United States, but he already has the seed of Warren Buffett in him. Jake Freeman, a 20-year-old American student at the University of Southern California, won $110 million betting on Bed Bath and Beyond. This American company specializes in marketing home items such as doormats, blankets, home appliances, towels, pillows and more.

The young man acquired on July 20 through his company Freeman Capital Management a total of 4.97 million shares of this group. According to Financial Times, which revealed the history of this stockbroker, Jake Freeman bought all of its stock at less than $5.50 per share, paying about $25 million. In order to raise such an amount, the student assured “FT” that he collected funds from his family, friends and other people around him.

He took it well, as the Bed Bath and Beyond action subsequently took off, multiplying its course more than 5 times. That rally was fueled by a huge influx of retail investors who decided on the Reddit social network to band together to push the stock higher and take down short sellers. This type of model has already emerged during the pandemic with the video game store chain GameStop.

Simple strategy

A statement to the SEC, the watchdog of the US stock market, shows that the student sold his position on August 16. Total amount of the sale: more than 130 million dollars, according to “FT”, for a capital gain, which therefore reaches approximately 110 million dollars, or 110 million euros.

“The strong appreciation in BBBY’s share price [Bed Bath and Beyond, NDLR]coupled with the fact that I’m off to college tomorrow played a vital role in closing this [sa] position,” Jake Freeman explained on Reddit, just after being relieved of his titles.

In this way, the student applied the most basic strategy that exists in the stock market: buy when stocks are low and sell when they are high.

However, the young investor told the FT that he did not expect the Bed Bath and Beyond title to rise so quickly. “I thought it was going to be a bet for over six months, I was really shocked it went up so quickly,” he insists.

Jake Freeman had a hollow nose after the US retailer’s shares subsequently collapsed, falling to $11. It is about the announcement of the sale of stock and options on the title by American billionaire Ryan Cohen, president of GameStop. The businessman, who invested through his holding company RC Ventures, also made a nice capital gain of $68.1 million by closing his position.

Strong potential

As Business Insider reports, Jake Freeman explained in a Twitter Spaces conversation that he invested in Bed Bath and Beyond because he believed the stock price reflected expectations of bankruptcy. The young investor believes that this outcome can be avoided and therefore believes that the title has great potential, provided that the company’s management implements the right measures to strengthen its financial structure.

As a result of his involvement with Bed Bath and Beyond, the student even took the liberty of writing a letter to the struggling company offering ideas to raise the bar. “BBBY is facing an existential crisis for its survival,” he wrote. Jake Freeman has proposed that the US group create a complex financial scheme, based in particular on issues of bonds convertible into shares, to strengthen its balance sheet.

The mechanism was to allow the company to take advantage of its status as a “stock meme”—that is, a value valued by individual investors—to cut its debt in half.

“I continue to see a lot of value in BBBY and a lot of ways for BBBY to avoid bankruptcy,” he said on Reddit after selling his titles.

Bad Beth and Beyond has not yet filed for bankruptcy. On Thursday, The Wall Street Journal reported that the company is in advanced talks with asset manager Sixth Street Partners to secure a $400 million loan and shore up its liquidity.

Soon to the White House?

Aside from this apparently high-profile coup, Jake Freeman presents a very peculiar profile. The young man learned the basics of stock market investing from his uncle Scott, a former top executive in the pharmaceutical industry, from the age of 13, the Financial Times reports. He also interned from the age of 17 at a hedge fund (hedge fund) in New Jersey, Volaris. The student has also co-signed an academic study with the founder of this company, Vivek Kapoor. Now they would study Sanskrit, an ancient Indo-European language, together.

However, according to the FT, Jake Freeman has even tried to run for the US presidential election in 2020, wanting to become the youngest candidate for that election. His attempt had not gone very far. With his newfound fame, will he try the experience again in 2024?

Julien Marion – ©2022 BFM Bourse

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