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

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

Johnny Milano | Bloomberg | Getty Images

A group of highly speculative stocks rose by double digits on Wednesday as retail investors pushed meme names back into the new year after a dismal 2022.

Bed Bath & Beyond surged a whopping 50% to spark the trend in morning trading on Wednesday. Shares of GameStopthe original star of 2021’s meme stock craze, climbed more than 10%. AMC Entertainment rose by 18 percent.

Meme shares rally once more

Storage Short interest % floating Wed. Gain % discount 52W high
Bed Bath & Beyond (BBBY) 48.9% 60% -89%
AMC (AMC) 21% 15% -78%
GameStop (GME) 21% 8% -62%

Source: Fact set

The rally in Bed Bath & Beyond was initially sparked by news that it would lay off more employees in an effort to cut costs and stay in business.

The home goods retailer told employees it is eliminating the role of chief transformation officer, held by Anu Gupta, on the same day it reported disappointing third-quarter financial results. Bed Bath & Beyond is nearing potential bankruptcy, as sales fall and losses mount.

“We don’t love the strength in nonsense stocks like AMC, CVNA, GME, BBBY, PRTY, etc.,” said Adam Crisafulli, founder of Vital Knowledge. “This just means people are chasing blind.”

During early 2021, a group of retail traders banded together on social media to bid up a number of heavily shorted stocks, creating massive short squeezes that caused short sellers great pain. These meme stocks experienced major setbacks last year as risk sentiment shifted amid aggressive rate hikes. GameStop fell 50% in 2022, while AMC fell 75% and Bed Bath & Beyond plunged 82%.

While the short interest in these names has come down from the peak after the jaw-dropping episode, it is still much higher than average.

About 48% of Bed Bath & Beyond’s outstanding shares are sold short, compared to an average of 5% short interest in a typical U.S. stock, according to S3 Partners. For GameStop, the short rate is 21%, down from more than 100% at the height of the meme stock mania in 2021, according to FactSet. AMC has also sold 21% of the shares short.

A short squeeze occurs when a stock jumps sharply higher, forcing short sellers to buy back shares to limit their losses. The short covering tends to drive the stock’s rally further.

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