(Bloomberg) - Ryan Cohen was like a Warren Buffett of the meme-stock frenzy, inspiring a small army of day traders seeking to pocket big gains by piggybacking on his bets on struggling retailers.
It hasn’t been a winning strategy recently.
Alibaba Group Holding Ltd.’s stock has fallen some 40% since the billionaire’s stake in the Chinese Internet giant was reported last January as the nation’s stock market slumped and the company lost ground to rivals.
The slide is another black eye for the billionaire, who gained a following after GameStop Corp.’s shares surged in 2021 while he made a push to revive the video-game retailer. But that company’s stock price has since tumbled over 80% from its peak even as Cohen has taken over as chief executive officer and moved to make stock-market bets with the company’s cash — an unusual step, since companies typically invest in their own businesses instead.
“Just like there are meme stocks that traders gravitate to, there are meme characters: Elon Musk is one, as is Ryan Cohen,” said Matthew Tuttle, CEO of Tuttle Capital Management. But blindly following others’ investment moves, he said, “rarely works out.”
Efforts to reach GameStop and Cohen for comment weren’t successful. Email messages to Cohen and GameStop’s investor relations office weren’t returned, and the voicemail box for the phone number listed on the company’s press releases was full.
Cohen, who is in his 30s, has had investment successes. After selling Chewy Inc., the pet retailer he co-founded, for more than $3 billion in 2017, he plowed much of that into Apple Inc. stock, which went on to rally. His firm, RC Ventures LLC, first disclosed its GameStop stake in 2020 when the shares traded below $2 on a split-adjusted basis (the retailer executed a four-for-one stock split in 2022). They’re around $14 now, but down sharply from their early 2021 peak of more than $86.
Other bets haven’t fared as well. While Cohen made a profit by investing in Bed Bath & Beyond Inc. in 2022, his swift exit after the stock surged left retail traders sitting with big losses before the company ultimately collapsed into bankruptcy. And department store retailer, Nordstrom Inc., in which he disclosed a stake in early last year, lagged during the subsequent stock-market rally.
Cohen started buying Alibaba shares during the second half of 2022, a period when they traded as low as $63, according to people familiar with the matter, and was said to hold hundreds of millions of dollars worth by early last year. The stock gained in late 2022 on optimism about the end of China’s pandemic lockdowns and now trades around $70.
The bet on Alibaba drew skepticism because of the e-commerce firm’s large market value and as activism in China remains a novelty given the control Beijing has on its companies. Still, there was some speculation that Cohen’s influence could attract investors as he agitated for a ramp-up in share buybacks and predicted the internet giant would return to its pre-Covid days of double-digit growth.
But the stock was dragged down as China’s economy fizzled after the reopening and the government’s previous crackdown on tech firms rattled investors.
Cohen has extended his investment activities to GameStop, where he’s the largest stockholder. Last year, the board gave him the ability to use some of the company’s cash to make financial investments.
However, GameStop’s core business has continued to struggle as game streaming services sideline in-store purchases. As a result, it has faced pressure and criticism from the few remaining Wall Street analysts who follow the company, with three of the four rating the stock a “sell.”
“The investment decision could end up with a lucky win, or could result in a loss,” Wedbush Securities analyst Michael Pachter said of GameStop. It’s “scary to think he is allowed to gamble shareholder money on an unrelated investment.”
By Bailey Lipschultz and Abhishek Vishnoi
