Today, Bed Bath & Beyond (BBBY), a once powerful retail chain in the US that has been plagued by serious financial problems in recent years, is carrying out a wild rally that exceeds 40%.
The answer, it seems, lies with WallStreetBets, the micro-investors who tune into Reddit in search of heavily shorted stocks.
“We believe there is currently a short squeeze taking place in Bed Bath & Beyond,” Ortex analyst Evan Niu told Reuters, noting that 45% of the company’s stock is short.
A jump in the price of shorted stocks can force investors who have taken a short position to close them at higher prices in order to limit their losses.
And in turn, the massive demand from short sellers to close out their positions drives the already rising stock price even higher, a phenomenon known in the stock markets as a short squeeze.
Shares of Bed Bath & Beyond have soared above $11, a nearly three-month high, and are on track for their ninth straight up session.
Significantly, if it maintains its current rise, Bed Bath & Beyond’s market capitalization will have doubled to more than $900 million since the start of the rally on July 27.
Bed Bath & Beyond was the most bought stock among clients of brokerage Fidelity Investments, with more than three buy orders for every sell order. It was also the most active stock on US exchanges with 54.5 million shares changing hands in pre-market trading today.
The name of the heavily shorted stock, which has plunged more than 44% since the start of the year, was the most-searched name on Reddit’s WallStreetBets discussion board on Monday, according to Quiver Quantitative.
Users in the thread titled “GME, BBBY and AMC Memestock Megathread for Monday, August 8, 2022” reported that they are buying shares of the company in bulk.
One user wrote that he “took out a $27k loan and went all in on BBBY,” which a thread moderator appeared to confirm, according to CNBC.
Another user (TheDude0007) claimed to have taken advantage of BBBY’s rise, growing his $45,000 to nearly $450,000 by playing common stocks and call options.
It is recalled that the pattern of so-called “meme stocks” has appeared on Wall Street for the past two years, leading to the collapse of titles last year at impressively high prices, such as the now famous GameStop and AMC Entertainment.
Source: Capital
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
