A “Store Closing” banner at a Bed Bath & Beyond store on Friday, Jan. 6, 2023 in Farmingdale, New York.
Johnny Milano | Bloomberg | Getty Images
A clutch of highly speculative stocks advanced by double digits on Wednesday as retail investors again steered meme names into the new year after a disappointing 2022.
“We don’t like strength in frivolous stocks like AMC, CVNA, GME, BBBY, PRTY, etc,” said Adam Crisafulli, founder of Vital Knowledge. “It means people are following blindly.”
During the beginning of 2021, a group of retail traders joined forces to heavily short stocks on social media, triggering massive short squeezes that caused great pain to short sellers. These mim stocks experienced big pullbacks last year when risk sentiment turned amid aggressive rate hikes. GameStop fell 50% in 2022, while AMC fell 75% and Bed Bath & Beyond 82%.
Although the short interest in these names has come down from their peak after the surprise event, it still remains well above average.
According to S3 Partners, about 48% of Bed Bath & Beyond’s float shares are sold short, compared to an average of 5% short interest in a typical US stock. For GameStop, short interest is 21%, down more than 100% from the height of meme stock mania in 2021, according to FactSet. AMC also sold 21% shares short.
A short squeeze occurs when a stock jumps sharply, forcing short sellers to buy back shares to limit their losses. Short covering further boosts the rally of the stock.