The 20-year-old math student caused a fever on Wall Street

At the age of 18, Jake Freeman ran for president of the United States, collected signatures, formed a campaign committee, and registered with the Federal Election Commission.

“He wanted to be the youngest candidate,” said Eray Sabuncu, a friend who attended the same suburban New Jersey high school as Freeman. “I didn’t know he would be famous after that.”

Running for US President went nowhere, but Freeman, now 20, has become one of the youngest investors to make hundreds of millions of dollars by trading junk stocks (memes). A student of applied mathematics and economics at the University of Southern California, made $110 million after selling shares in underdog retailer Bed & Beyond.

On Tuesday, Freeman sold more than 6% of his stake in Bed & Beyond, which operates home and utility stores, for about $27 per share. It is worth mentioning that he had accumulated these shares just a few weeks earlier when the shares were trading below $5.50 per share.

“Initially, I expected the price to be maybe as little as $8 or $9 a share,” Freeman told the FT on Wednesday as he waited for the shuttle bus from the Los Angeles airport to the university campus. learn. “I was really shocked when the price went up so quickly.”

After building his stake in July, Freeman wrote a letter to the company’s directors arguing that they should employ a sophisticated financial strategy to capitalize on the retailer’s status as a Meme share to raise cash and cut debt by more than half.

The FT’s article on Freeman on Wednesday created a media storm. But the story of a college student winning the “Meme jackpot” also sparked widespread skepticism.

On Twitter and Reddit, questions abound, from whether Freeman really exists or acting as a proxy for how a young, amateur investor can make a lot of money. on placing bets in such a short period of time.

The top question is how he raised $27 million in the first place. Freeman is no stranger to such doubts. After disclosing his stake in July, he was the subject of a search campaign on Reddit, where investors tried to figure out his identity. Freeman said he was overwhelmed by the storm of press.

Through interviews with Freeman’s classmates, mentors, and teachers, he emerged as a precocious young man unencumbered by the normal pressures of his generation. During his teen summer years, Freeman spent working at a quantitative hedge fund.

What is less clear is how Freeman raised so much money for the startup. He declined to divulge the names of his investors, citing confidentiality agreements, but said he has sourced from friends, family and others in his orbit.

Freeman interned at New Jersey-based Volaris Capital Management under the advice of founder Vivek Kapoor, who said he was not involved in the Bed Bath transaction. The pair have published two academic papers examining complex theories about defaults and options contracts. “He’s not the typical model that schools are trying to mold,” says Kapoor. Jake is a smart, sharp guy with a dense nervous system that can solve any problem without being dogmatic.”

It was Scott, Freeman’s uncle, who first introduced him to stocks. Scoot is a pharmaceutical company executive who started investing with his grandson when Jake was 13 years old. Their first bet is worth 500 USD. Over time, his parents gave him more money, which he describes as “substantial”.

Raised in Summit, New Jersey, an affluent New York City suburb, Freeman was described by former high school classmates as smart and mature for his age.

Freeman begins assembling the deals that will make him famous this summer after a period of pent-up meme stocks like AMC, Gamestop and Bed Bath. The value of these stocks has sometimes skyrocketed thanks to retail traders.

Freeman believes something can be gained from the volatility in these stocks. He began looking for an ailing retailer to invest in, where the market had underestimated that company’s odds of survival. In June, Freeman bought debt in the Rite Aid Pharmacy chain, but the opportunity evaporated when the company announced a tender offer that sent bonds and stocks soaring.

Freeman then turned his attention to Bed Bath, a stock that had plummeted in value. “I realized how by reorganizing their debt, they could really reduce the rumored bankruptcy,” Freeman said.

The novel solution he proposed for Bed Bath involves using high volatility in stock prices to offer bondholders a deal that reduces the debt load from $1.2 billion to $500 million. USD.

On July 20, Freeman disclosed its investment, attached to it with a nine-page letter recommending that the company urgently pursue its proposed debt exchange. Without such action, he believes Bed Bath will soon go bankrupt.

Freeman then began discussing his investment on Twitter, Reddit, and a website called gmedd.com. He wants to make his plans clear to retail investors.

In August, Bed Bath stock started to skyrocket following fresh momentum on Reddit, where the Wallstreetbets moderator lifted a ban on discussing the stock.

At the beginning of last week, the stock price edged higher after Ryan Cohen, the president of Gamestop, filed documents with the SEC regarding previous purchases in February and March of a large number of stock call options. Bed Bath – derivatives that can provide a large return if a stock increases in value.

However, according to the Financial Times, Freeman achieved the “meme jackpot” not because of a clever idea, but by following a much simpler investment maxim: Buy low, sell high.

Source: Financial Times