Bed Bath & Beyond jumps 50% to lead ‘absurd’ rally in meme stocks; AMC gains 15%

A “Store Closing” banner on a Bed Bath & Beyond store in Farmingdale, New York on Friday, January 6, 2023.

Johnny Milan | Bloomberg | Getty Images

A group of highly speculative stocks rose double digits on Wednesday as retail investors drove meme names up again in the new year after a dismal 2022.

Bed bath and beyond rallied a whopping 50% to start the trend in morning trade on Wednesday. Shares of GameStopthe original stock meme mania star of 2021, soared over 10%. AMC Entertainment increased by 18%.

Meme stocks rally once again

Store Floating short interest rate Marry. Gain % reduction on 52W high
Bed Bath and Beyond (BBBY) 48.9% 60% -89%
AMC (AMC) 21% 15% -78%
GameStop (GME) 21% 8% -62%

Source: set of facts

Bed Bath & Beyond’s rally was initially sparked by news that it would be laying off more staff in a bid to cut costs and stay in business.

The home goods retailer told employees it was eliminating the role of chief transformation officer, which is held by Anu Gupta, the same day it announced disappointing third-quarter results. Bed Bath & Beyond nears potential bankruptcy as sales decline and losses mount.

“We don’t like the strength of nonsensical stocks like AMC, CVNA, GME, BBBY, PRTY, etc.,” said Adam Crisafulli, founder of Vital Knowledge. “It just means people are chasing blindly.”

In early 2021, a group of retail traders joined forces on social media to bid on a slew of heavily shorted stocks, creating massive short-term squeezes that inflicted severe pain on short sellers. . These same stocks saw major pullbacks last year when risk sentiment shifted amid aggressive rate hikes. GameStop fell 50% in 2022, while AMC fell 75% and Bed Bath & Beyond plunged 82%.

Although short interest in these names has waned since its peak after the jaw-dropping episode, it still remains well above average.

According to S3 Partners, approximately 48% of Bed Bath & Beyond’s free float shares are sold short, compared to an average of 5% short interest in a typical US stock. For GameStop, short-term interest stands at 21%, up from more than 100% at the height of the meme stock mania in 2021, according to FactSet. AMC also has 21% of shares sold short.

A short squeeze occurs when a stock jumps sharply higher, it forces short sellers to buy back stocks in order to limit their losses. The short cover tends to further fuel the stock’s rally.

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