The idea that a stock of a company suffering under a dying business model can experience explosive gains thanks to a concerted effort of determined ‘Redditors’ seemed preposterous prior to the start of 2021, especially considering these groups were going head-to-head with large Wall Street hedge funds. However, with Bed Bath & Beyond recently soaring in the footsteps of meme stock legends like GameStop and AMC, it’s providing the market with clear proof that ‘Meme Stock Mania’ is, in fact, alive and well.
However, the case of the subreddit r/wallstreetbets and its successful plan to buy Gamestop (NYSE: GME) en masse gave the world the first example of a meme stock. Social media had successfully manipulated the stock price of a billion-dollar company, and the stock market as we knew it would never be the same.
Meme stock mania didn’t stop with Gamestop. Other companies like AMC Entertainment (NYSE: AMC) and BlackBerry (NYSE: BB) also were swept up into meme stock mania throughout 2021, to varying degrees of success. 2022 has been quieter on the meme stock front, thanks to the looming recession, but that appears to be changing.
Bed Bath & Beyond (NASDAQ: BBBY) became the latest meme stock in early August. After a multi-year fall saw the stock reach all-time lows, short interest was heavy. This is the exact situation that attracts r/wallstreetbets and its legions of followers. Seeking to cause a short squeeze similar to the one that led to explosive gains for GameStop, the Redditors began to buy large amounts of BBBY shares.
The plan is working so far, with BBBY shares up as much as 300% in under three weeks. The shorts are getting squeezed, and Redditors are making vast sums of money. The questions that nobody answers are just how high the stock can go and how long the stock can maintain its meme status; short interest remains high, meaning further squeezing is possible, should the Redditors continue buying and holding.
What’s not in question is that Bed Bath & Beyond is not well. The company has been laying off workers and closing stores amid falling revenues. Like many other brick-and-mortar retailers, the company is struggling to compete in the digital era.
With dwindling cash reserves and an obsolete business, Bed Bath & Beyond is not long for the world. At least it wouldn’t be if not for the meme stock investors. They have a way of propping up stock prices enough for companies to survive past their expiration date. Only those with high-risk tolerance and a short-term investment timeframe should consider the stock.
Shares of Bed Bath & Beyond are currently trading at $17.53 per share, down -24.05% on the day. YTD BBBY stock is up +15.63%.
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Disclaimer: Wealthy VC does not hold a position in any of the stocks mentioned in this article.