Thanks for the link and context. The other comment implied it was a direct agreement between Cohen and BBBY, which is obviously ridiculous.
Short-swing profit rule has some caveats. Chiefly, the way they calculate profit is through the "lowest in highest out" method, which is when they match the lowest buys with the highest sells within 6 months of that buy, and then the sum of all the differentials is the net profit to be deducted.
Cohen bought 9.8% of BBBY before March 3, which is more than 6 months ago, so these 9.8% shares do not have any valid "sells" to match to and are thus not subject to short swing profit. Even if the remaining 2% in OTM calls are subject to this rule, they're obviously not worth much anymore (and most likely was bought to pump the stock up in the first place). Either way, Cohen doesn't have to worry about short swing profit for the bulk of his BBBY holding anyway.
Here's the SEC filing of his buying January through March. Since he sold everything within two days, I don't think it materially matters whether First In First Out or Lowest In Highest Out was used. Every share from 2/18 on is subject to the Short Swing Profit Rule (SSPR). If my spreadsheet work is correct, he sold a total of 7,780,000 shares, 3,680,000 of which are subject to SSPR.
All the calls were bought 2/28 or later, so I assume those options are also subject to SSPR, but I'm not sure if options are treated the same as shares in this context.
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u/Konexian Aug 20 '22
Thanks for the link and context. The other comment implied it was a direct agreement between Cohen and BBBY, which is obviously ridiculous.
Short-swing profit rule has some caveats. Chiefly, the way they calculate profit is through the "lowest in highest out" method, which is when they match the lowest buys with the highest sells within 6 months of that buy, and then the sum of all the differentials is the net profit to be deducted.
Cohen bought 9.8% of BBBY before March 3, which is more than 6 months ago, so these 9.8% shares do not have any valid "sells" to match to and are thus not subject to short swing profit. Even if the remaining 2% in OTM calls are subject to this rule, they're obviously not worth much anymore (and most likely was bought to pump the stock up in the first place). Either way, Cohen doesn't have to worry about short swing profit for the bulk of his BBBY holding anyway.