20-Year-Old American Economics Major Earns Over 140 Billion KRW in One Month: "Surprised by the Rapid Rise"

Expert: "Investment Without Rational Reason Is Gambling" Warning on 'Meme Stocks'

Traders are at work on the floor of the New York Stock Exchange (NYSE) in the United States.
[Photo by Yonhap News]

[Asia Economy Reporter Yoon Seul-gi] A 20-year-old American college student made a profit of about 140 billion KRW in one month by investing in Bed Bath & Beyond (BBB) on the New York Stock Exchange. BBB is classified as a meme stock, and warnings have been issued to be cautious in investing due to its abnormal price fluctuations.

According to the Financial Times (FT) recently, Jayp Freeman, a 20-year-old college student majoring in applied mathematics and economics at the University of Southern California, earned $110 million (approximately 146.4 billion KRW) by investing in BBB.

Earlier, in early July, Freeman purchased about 5 million shares of BBB, a U.S. bathroom products retailer, at a price below $5.5 per share. At that time, BBB’s stock price had plummeted after announcing poor earnings and the CEO’s resignation. He bought the shares through a fund named Freeman Capital Management, and most of the capital of about $25 million (approximately 3.32 billion KRW) was reportedly raised from family and friends.

About a month later, on the 16th, BBB surged to over $27 per share. Freeman sold all the BBB shares he held. In an interview with FT, Freeman said, "I did not expect such a steep rally," adding, "I was planning to watch it for about six months, but it rose so quickly that I was surprised."

Recently, interest in meme stocks has been rising again on Wall Street through online word of mouth. Along with BBB, other representative meme stocks such as GameStop and AMC Entertainment have also risen significantly since early July.

However, experts warn to be cautious when investing in meme stocks. Stock prices are rising abnormally even without positive news. Matt Miskin, chief investment strategist at U.S. investment firm John Hancock, said in a Yahoo Finance interview, "Pouring money in driven by emotions without rational reasons is no different from gambling," adding, "In a period when the Federal Reserve continues to raise interest rates and stock price gains are not highly expected, such investment behavior should be regarded as speculation. Emotion-driven investing dominating the market is a negative signal that the market is near its peak."

The large price fluctuations also increase investment risks. In fact, the BBB stock, which had been soaring, plunged within 24 hours after Freeman sold his shares, following the revelation that Ryan Cohen, who had purchased the meme stock GameStop last year, sold all of his 9.45 million shares of BBB.