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

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

(BFM Bourse) – Jake Freeman has invested in housewares group Bed Bath and Beyond. He took his profits at the right time, as the company subsequently saw its share price plummet.

He is not yet of drinking age in America, 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 gambling on Bed Bath and Beyond. This American company specializes in the sale of household items, such as doormats, blankets, electrical appliances, towels, cushions, etc.

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 broke the story of this stockbroker, Jake Freeman, bought all of his shares for less than $5.50 a share, paying around $25 million. To raise such a sum, the student assures the “FT” that he has raised funds from his family, friends and others around him.

He took it well as the Bed Bath and Beyond action subsequently took off, multiplying his course by more than 5. This rise was fueled by a massive influx of retail investors who decided to join the Reddit social network to boost stocks and topple short sellers. This type of pattern had already occurred during the pandemic with the GameStop video game store chain.

A simple strategy

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

“The sharp appreciation of BBBY’s share price [Bed Bath and Beyond, NDLR]combined with the fact that I am leaving for college tomorrow, played a vital role in bringing this [sa] position,” Jake Freeman explained on Reddit, just after being relieved of his titles.

The student thus applied the most basic strategy that exists on the stock market: buy when the stock is low and sell when it has risen a lot.

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 would be a bet for more than six months, it shocked me a lot that it went up so fast,” he insists.

Jake Freeman had a hollow nose as shares of the US retailer subsequently tumbled, falling as low as $11. In question, the announcement of the sale of shares and options on the title by the American billionaire Ryan Cohen, president of GameStop. The businessman, who invested through his holding company RC Ventures, also pocketed a handsome $68.1 million capital gain by closing out 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 share price reflected bankruptcy expectations. The young investor considered this outcome avoidable and therefore thought that the security had great potential, provided that the company’s management applied the appropriate measures to strengthen its financial structure.

In the wake of his involvement with Bed Bath and Beyond, the student even took the liberty of writing a letter to the struggling company, suggesting ideas for raising the bar. “BBBY faces an existential crisis for its survival,” he wrote. Jake Freeman had suggested to the US group that it establish a complex financial scheme based in particular on issues of bonds convertible into shares to strengthen its balance sheet.

The mechanism consisted of allowing the company to capitalize on its status as a “meme stock”, that is, a value appreciated by individual investors, in order to reduce its debt by half.

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

Bad Beth and Beyond has yet to file for bankruptcy. On Thursday, The Wall Street Journal reported that the company was in advanced talks with an asset manager, Sixth Street Partners, to secure a $400 million loan and bolster its liquidity.

Soon in the White House?

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

Still according to the “FT”, Jake Freeman had even tried to run for the 2020 US presidential election, wanting to become the youngest candidate for this election. His attempt hadn’t gone very far. With his new notoriety, will he try the experience again in 2024?

Julien Marion – ©2022 BFM Bourse

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