One of the leading business headlines over the long early September weekend was also a ghoulish one: the suicide of Bed Bath & Beyond Inc.’s (NASDAQ: BBBY) CFO, Gustavo Arnal. The 52 year-old executive plunged to his death in New York City. While no one will ever know with certainty the reason for Arnal’s action, it may suggest a federal lawsuit filed in late August against him and Ryan Cohen, GameStop Corp.’s (NYSE: GME) chairman and a prominent investor in BBBY, could have some degree of credibility.
On August 23, a group of shareholders filed a class action lawsuit against Arnal and Cohen in the U.S. District Court for the District of Columbia. The investors claim they lost about US$1.2 million on their BBBY investment. The suit alleges that Arnal and Cohen and others conspired to artificially inflate the stock price of BBBY. One way to do so, per the suit, was to grossly misrepresent the potential impact of a spin-off of its buybuy Baby brand, which in reality had only small revenues.
Even more important, the investor purports that Cohen and Arnal had frequent conversations with JPMorgan in March through August of 2022. The shareholders claim Arnal issued materially misleading statements to investors. The goal was to create a “purchasing frenzy” for BBBY stock, mirroring the impact on GameStop’s stock in 2021. Cohen has a cult status with a certain set of investors.
One section of the court filing, if proved to be true, would be extraordinarily inflammatory for a number of parties, including BBBY. The investor contends that “with control over a significant portion of the public float, Cohen would essentially act as a price support for the stock while Gustavo [Arnal] would act in a similar capacity by controlling the sale of shares by Insiders. Under this arrangement, [Arnal and Cohen] would profit handsomely from the rise in price and could coordinate their selling of shares to optimize their returns.”
According to SEC filings, Arnal, who joined BBBY in 2020, sold about 55,000 shares of BBY stock over August 16-17 for total proceeds of around US$1.4 million. He still apparently owned 255,400 shares at the time of his death.
On August 31, BBBY announced plans to close 150 stores and shrink its headcount by 20% The company also announced it had secured more than US$500 million in new financing. Arnal was intimately involved in all those decisions and capital raising plans.
Cohen disclosed he owned nearly a 10% stake in BBBY in early March. His investment firm, RC Ventures, disclosed plans to sell the position on August 17.
Bed Bath & Beyond Inc. last traded at US$7.76 on the NASDAQ.
Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
