Reddit’s new favorite meme stock is doing what meme stocks do: spiking to an unsettling degree.
This time the stock symbol riding the r/wallstreetbets roller coaster is “BBBY,” for Bed Bath & Beyond, the brick-and-mortar chain store where you can pick up a Keurig machine and some candles, and save big with one of their famous 20-percent-off coupons.
As of Tuesday afternoon, BBBY had skyrocketed 67 percent in a day, according to The Wall Street Journal, which noted that at the top of its Tuesday spike, shares were trading at $28.04, after being worth $8.88 a week earlier.
The meme stock phenomenon goes a little something like this: Users of retail investing apps and services like Robinhood read slur-laced stock “tips” on the internet, and then drive up stock prices, ostensibly in opposition to the stodgy bean counters in the traditional investment world. In reality, stodgy bean counters like the folks at Senvest Management, which made about $700 million from the Gamestop Reddit phenomenon, are often the ones who make the most money from meme stocks. Meanwhile, small-fish investors who YOLO their life savings into stocks they read about on Reddit often simply lose their life savings.
At the start of March, The Wall Street Journal reported that Chewy.com billionaire and GameStop chairman Ryan Cohen had written a letter disparaging Bed Bath & Beyond’s operational plan, and in the process, announced that he owned 9.8 percent of the company. Naturally, r/wallstreetbets took notice, with one post praising Cohen as “the meme king,” and saying “Ryan Cohen will never be matched,” earning 10,423 Reddit karma points. Ever since then, Bed Bath & Beyond stock has been in a tug of war between meme-fueled exuberance and traditionalist pessimism.
The stock saw a brief spike in March, and then about five months of steady decline. Then in early August, it saw an uptick, and a Redditor named TheDude0007 posted about making a risky $45,000 investment in the company. Then Bed Bath & Beyond’s fortunes began to improve quickly. And now some commentators are predicting a “short squeeze” — a spike in a stock price that occurs when those who have bet against the stock rush to exit their toxic investment by buying the stock in question, thus driving up the price drastically.
But meme stocks have been eyed by analysts for allegedly feeding off the activity of social media bots — particularly in the cases of Reddit favs AMC and GameStop. Since its stock price exploded in early 2021, GameStop has seen an aggressive new business plan that involves an attempt to “reduce bloat” by laying off workers.
Trading analyst Jared Dillian wrote on August 11 that the Bed Bath & Beyond craze in particular seems likely to be fueled less by retail investors than by hedge funds, since, Dillian surmises, many retail investors have blown through their COVID-era stimulus checks.
“So, the meme-stock trade today isn’t really r/wallstreetbets versus big bad hedge funds, it’s big bad hedge funds versus big bad hedge funds. Those Reddit users who are still around are simply along for the ride,” writes Dillian.