New Meme-Stock Rally: Bed Bath & Beyond Surges, But Experts Warn Hype Poses ‘Significant Risk’

Topline

The volatility facing top meme stocks like Bed Bath & Beyond intensified on Tuesday—with shares skyrocketing and then collapsing before surging again—as analysts warn that institutions are doubling down on bearish bets against the stocks despite retail traders seemingly driving up interest, setting up what could be another ill-fated short squeeze.

Key Facts

Crucial Quote

“Given the ongoing poor investor sentiment and the weakening macro backdrop, it is not uncommon to see sporadic short squeezes driven and then chased by retail investors,” analysts at Vanda Research wrote in a recent note to clients. “We still view any sustained meme rally as unlikely unless markets enter a more friendly [economic] regime,” the team adds, positing traders will likely “rush to lock in profits before it’s too late.”

Despite their recent gains, shares of Bed Bath & Beyond have collapsed 90% from a closing high of about $35 in January 2021, when retail traders flush with cash plowed into heavily shorted stocks and drove a massive rally. The renewed interest from retail traders this year follows reports the struggling retailer is preparing a Chapter 11 bankruptcy filing that could come within weeks. The firm has stated it is exploring actions including restructuring, debt refinancing, selling assets and filing for bankruptcy relief, and it’s even acknowledged the measures may not ultimately be successful. Meanwhile, fellow meme stock GameStop has collapsed about 80% since its peak two years ago.

Further Reading

Bed Bath & Beyond Reportedly Plans Bankruptcy As Meme Stock Crashes Amid ‘Substantial Doubt’ Business Can Continue (Forbes)