In the case In re Bed Bath & Beyond Corp. Sec. Litig., No. 1:22-cv-2541 (TNM) (D.D.C. July 27, 2023), District of Columbia District Judge Trevor N. McFadden found that the moon emoji tweet sent by an investor in Bed Bath & Beyond was actionable because there was a “substantial likelihood that a reasonable investor would consider it important”, so he refused to dismiss the claim against the investor, finding it to be plausible.
In this case against Bed Bath & Beyond, its CEO and investor Ryan Cohen over an alleged “pump-and dump” scheme to inflate the value of the stock before selling, Cohen (who had previous investing success with GameStop and others) bought a 9% stake in Bed Bath & Beyond, and with this leverage he made public business recommendations and picked several members for its board of directors.
After a series of bad news announcements for Bed Bath & Beyond, CNBC tweeted a negative story about Bed Bath on August 12, 2022, accompanied by a picture of a woman pushing a shopping cart. Cohen responded with this tweet:
As Judge McFadden stated: “Some online communities understand the smiley moon emoji to mean ‘to the moon’ or ‘take it to the moon.’…In other words, according to Plaintiff, Cohen was telling his hundreds of thousands of followers that Bed Bath’s stock was going up and that they should buy or hold. They did so, sending the price soaring.”
On August 16 and 17, Cohen sold his entire stake in Bed Bath and “made out handsomely”, profiting $68 million. Once news finally broke that Cohen had sold, Bed Bath’s stock plunged. After closing at over $20 on August 16 and $23 on August 17, the stock plummeted to under $9 within the next few days.
One investor who lost money, Bratya SPRL, sued, alleging that it was a “pump-and dump” scheme. The moon emoji tweet was at issue as the plaintiff contended that it was perceived “as a rallying cry to buy Bed Bath’s stock,” even though Cohen had soured on Bed Bath.
Regarding Cohen’s objections that “emojis can never be actionable because they have no defined meaning” and that “emojis are at the very least ‘ambiguous’”, Judge McFadden stated: “But those claims get him nowhere.”
Continuing, he said: “To understand why, zoom out. Emojis are symbols. Like symbols, language can be ambiguous. If you say, ‘The Nats are going to win the World Series this year,’ and your friend replies, ‘Right,’ she may be agreeing with you, but it could also be a sarcastic reply. Context and tone help elucidate meaning. Just because language can be ambiguous does not mean it is not actionable or capable of being correctly understood.”
He added: “So too with symbols. People use symbols as ‘a primitive but effective way of communicating ideas.’…Sometimes, symbols are ambiguous. If you texted your friend to ask him to have dinner with you and he responded with the steak emoji, you might reasonably wonder if he wanted to go to a steak house or fire up the grill. But like language, a symbol’s meaning may be clarified by ‘the context in which [the] symbol is used.’…So if you knew that friend had sworn off restaurants, then you could be more certain that he was up for a cookout.”
Judge McFadden stated: “The questions here thus become: (1) Has Bratya plausibly alleged that the moon emoji has a particular meaning in the context in which it was used? And if so, (2) is that meaning actionable?”
Addressing the first question, Judge McFadden stated: “First, Bratya has plausibly alleged that the moon tweet relayed that Cohen was telling his hundreds of thousands of followers that Bed Bath’s stock was going up and that they should buy or hold. In the meme stock ‘subculture,’ moon emojis are associated with the phrase ‘to the moon,’ which investors use to indicate ‘that a stock will rise.’…So meme stock investors conceivably understood Cohen’s tweet to mean that Cohen was confident in Bed Bath and that he was encouraging them to act. For example, one investor replied to Cohen ‘buy $BBBY. Got it. Thanks.’…And Bratya plausibly alleges that Redditors gleaned the same message.”
Addressing the second question, Judge McFadden stated: “Second, that meaning is actionable. For one, it is plausibly material. That is, there was a ‘substantial likelihood that a reasonable investor would consider it important.’…Investors appear to have relied on it, driving Bed Bath’s stock price up in the following days.”
Continuing, he said: “Plus, that makes sense… He had a large stake himself. He was ‘maniacally focused on [Bed Bath’s] long-term.’…He had a public cooperation agreement with Bed Bath…He allegedly had access to material, nonpublic information…And it seemed that he had helped oust Bed Bath’s former CEO…So it was not crazy for retail investors to follow his lead.”
In denying the request to dismiss the claim over the moon emoji tweet, Judge McFadden concluded by stating: “Nor is the tweet mere puffery…If Bratya had alleged only that the tweet expressed Cohen’s hope that the stock would rise, that would not be actionable…Likewise, if Bratya had alleged only that the tweet signaled Cohen’s excitement about Bed Bath, Bratya would have no claim…But Bratya has plausibly alleged that Cohen’s tweet was more, an expert insider’s direction to buy or hold.”
So, what do you think? Do you think the moon emoji tweet should have been actionable? Please share any comments you might have or if you’d like to know more about a particular topic.
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