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Bed Bath & Beyond Quadruples as Retailers Fuel Latest Burst

(Bloomberg) — Bed Bath & Beyond Inc. continued to rally Thursday, rising for a fourth day and closing at its highest level since late October, after the company’s bankruptcy warning sparked interest from retailers.

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Shares in the home goods retailer rose 50%, and are up 166% from the previous three sessions. Other so-called meme stocks also extended their gains on Thursday after jumping on Wednesday. Carvana Co. rose 46% in its biggest advance ever, while meme-making poster children AMC Entertainment Holdings Inc. and GameStop Corp . then more modest gains.

Retailers have helped drive the latest surge, funneling millions into Bed Bath & Beyond and pumping up their efforts on social media sites and chat rooms. Those investors snapped up $7.3 million in Bed Bath & Beyond shares on Wednesday to more than double their net purchases since markets closed on Jan. 4, Vanda Research data show.

That buying continued Thursday with the stock receiving the second-most buy orders on Fidelity̵[ads1]7;s platform, trailing only Tesla Inc. Sales across platforms such as Reddit’s WallStreetBets and Stocktwits have accelerated in recent days along with retail trading.

Volatility in Bed Bath & Beyond has skyrocketed since the company warned last week that it might have to file for bankruptcy. The stock’s 10-day volatility hit its highest level in at least five years, surging past levels seen when the meme stock craze captivated investors in early 2021.

Back then, individual investors banded together on social media with the goal of punishing short sellers while making a killing for themselves. That led to sensational rallies in stocks such as Bed Bath & Beyond and GameStop. With the Bed Bath & Beyond card rate rising to about 53% from 47% a month ago, according to data from research firm S3 Partners, a further squeeze could be on the horizon.

“If bankruptcy is not in Bed Bath & Beyond’s future, the rising stock price will force a massive short squeeze and short sellers will rush to the doors and buy to cover to keep some of the market gains they made in 2022,” wrote Ihor Dusaniwsky, head of predictive analytics at S3 Partners, in a research note.

Bed Bath & Beyond fell 83% in 2022 in its worst year ever, according to data compiled by Bloomberg going back to 1993.

The retailer has the second-largest short interest as a share of floating shares with more than $10 million in short interest, behind only Silvergate Capital Corp., Dusaniwsky said. But a key difference between Bed Bath & Beyond and other crowded shorts is the increasing likelihood of a bankruptcy.

“If the threat of bankruptcy becomes more certain, the prospect of a Bed Bath & Beyond short squeeze becomes less and less, we can expect minimal short-covering as short-sellers await a $0.00 share price,” he wrote.

Bed Bath & Beyond is talking to potential lenders who would finance the company during bankruptcy proceedings, Bloomberg reported Thursday, citing people with knowledge of the matter. Traders seemed unfazed by the report, pushing shares up about 6% in late trading.

Despite the recent rally, Bed Bath & Beyond is still down about 90% from a peak of $52.89 during the meme stock about two years ago.

(Updates share price movements throughout; adds details of company’s talks with potential lenders in penultimate paragraph.)

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