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Stock market: a 20-year-old student panics Wall Street and wins 110 million

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Summer on Wall Street is conducive to beautiful stories, worthy of the film of the same name starring Michael Douglas (1987) or the wolf of wall street (2013) starring Leonardo DiCaprio. A few days ago, it was Kenneth Griffin who dazzled.

The founder and manager of the Citadel fund, one of the most important American traders, whose fortune is estimated at 29 billion dollars, announced staggering results, equivalent to a gain of 23.3 million dollars per day in 2022, or 16,000 dollars per minute.

New Wall Street Superhero

Well known locally, this billionaire employs more than 1,000 people around the world to speculate. To do this, and despite its huge war chest, it continues to go into debt before interest rates go up for good, which it has just done to the tune of 400 million dollars.

Another star shone in the firmament of the American Stock Exchange this summer. Totally unknown, Jake Freeman became in a few hours a subject for all major Anglo-Saxon media, including the Financial Times. The newspaper devotes a long article in its August 19 edition to the stock market coup that allowed him to pocket, at age 20, a jackpot of 110 million dollars.

At the limit of manipulation

His adventure is very reminiscent of the beginning of the wolf of wall street. We remember that the hero of the film, the young Jordan Belfort (a character who existed) made himself known in the world of finance by speculating on very discounted and volatile shares of companies on which he diffused information to vary prices, attracting other investors along the way. This technique of pump and dumpbordering on price manipulation, is currently very much in vogue, thanks to the skilful use of social networks and stock market platforms.

Let’s take the true story of Jake Freeman who panics the media. Unlike the self-taught Jordan Belfort, the young man was born into a rather favored environment. His uncle, Scott Freeman, had a big job in the pharmaceutical industry, before setting up on his own to invest, notably in a start-up called Mind Medicine, specializing in… psychedelic medicine. The nephew, Jake, the shoulder. He shares with him a passion for the stock market and finance.

As part of his studies, at 17, he even landed an internship at Volaris Capital, a hedge fund created by Vivek Kapoor. This former Credit Suisse employee was seduced by the young man’s abilities, and before he went to California to pursue his higher education, co-authored a research article with him on the use of default swapa risky financial technique.

A $25 million risk

His two mentors will undoubtedly have helped him to raise the 25 million dollars that he will invest in the “coup of the century”. Freeman is less well known than Kenneth Griffin, and it would be surprising if the banks agreed to lend him such a sum. The uncle and the former internship supervisor had to put their hands in their pockets with some friends…

From the campus of Southern California University, where he studies mathematics and economics in Los Angeles, Jake Freeman has spotted his prey. This month of July, he took action and bought shares in Bad Bath & Beyond via a structure, Freeman Capital Management, which he had previously registered in the State of Wyoming.

The timing owes nothing to chance. The obscure specialist distributor has just announced disastrous results and the dismissal of its manager. The action is all in at $5.5. The right level to win titles. Freeman pulls out all the stops, or the full $25 million. Suffice to say that the irruption of this investor created a stir in the company. Especially since according to documents from the Securities and Exchange Commission, he has become one of the main shareholders, with 6% of the capital.

Board under pressure

Very quickly, they will get to know Jake Freeman. The young man sends a letter to the board of directors noting that the company was playing its “survival”, and that its finances had to be restructured as soon as possible. The company, known for selling vacuum cleaners and gadgets, he said had to react as quickly as possible. Cash has actually gone from $1 billion to $107 million since the start of the year.

The Freeman Fund, like any good activist, then lectures administrators on crisis management. A mix of benevolence and threats familiar to listed companies dealing with this type of shareholder.

The operation, well relayed on the networks, meets a wide echo. Because the title is followed quite closely by speculators frequenting the Reddit network. They know these figures and took short positions, accelerating the fall of the title. But the arrival of Freeman’s 25 million dollars for the purchase and the communication carried out around his letter to the board of directors halted the decline and reversed the trend. Investors in a sell position will be forced to buy back securities to reduce their risk-taking and stop the haemorrhage of their potential losses.

Panic among short sellers

On Wall Street, this type of situation is called a “squeeze shorts“. The effect? ​​Boost the rebound of the title previously massacred by the same speculators. Except that Freeman, he has never been for sale. He will be able to pocket all the added value. But he hesitates. Even if the title has been multiplied by 5, his intention is to stay at least 6 months in the business, the time to observe if the new management begins to follow his recommendations, or to monitor if the company thus highlighted attracts big fish from the sector .

For example, he is betting on the interest of Ryan Cohen. A 12% shareholder in Bad Bath & Beyond, the businessman also loves stock market shocks. He is mainly the owner of the Chewy chain, which specializes in accessories and food for pets. On August 15, Jake Freeman learns that Ryan Cohen, far from wanting to trigger a takeover bid, is selling his positions. The next day, the Californian student took action and sold his entire stake on the market for more than 130 million.

Results of the operation: 110 million dollars in earnings in a few weeks. Once the bet was picked up, Bad Bath & Beyond was left to its speculative value fate with a 20% plunge in the stock. Ryan Cohen, who would have realized a capital gain of 68.1 million dollars, hinted that he was not losing interest in the file, and had taken positions again. Jake Freeman, he said he had celebrated the operation by going to dinner with his parents in a suburb of New York. Before returning to its Los Angeles campus.

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