Bed Bath & Beyond Triples as Retail Traders Fuel Latest Burst

(Bloomberg) — Bed Bath & Beyond Inc. continued to surge on Thursday, rising for a fourth day and hitting the best level since early November, after the corporate’s bankruptcy warning reignited interest from retail traders.

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Shares within the home-goods retailer climbed as much as 29%, adding to 166% gains from the previous three sessions. Other so-called meme stocks also added to gains Thursday after jumping Wednesday. Carvana Co. rallied 17% while meme-stock poster-children AMC Entertainment Holdings Inc. and GameStop Corp. saw more modest gains.

Retail traders have helped drive the most recent surge, funneling tens of millions into Bed Bath & Beyond and pumping their bets on social media web sites and chatrooms. These investors snapped up $7.3 million of Bed Bath & Beyond stock Wednesday to greater than double their net purchases for the reason that markets closed on Jan. 4, Vanda Research data show.

That purchasing continued Thursday with the stock seeing the second-most buy orders on Fidelity’s platform, only lagging Tesla Inc., with purchases outpacing those to sell. Touts across platforms like Reddit’s WallStreetBets and Stocktwits have accelerated in recent days alongside retail buying.

Volatility in Bed Bath & Beyond has soared for the reason that company warned last week that it might have to file for bankruptcy. The stock’s ten-day volatility hit the best level in at the very least five years, surging past levels seen when meme-stock mania captivated investors in early 2021.

Back then, individual investors teamed up on social media with the goal of punishing short sellers while making a killing for themselves. That fueled eye-popping rallies in stocks corresponding to Bed Bath & Beyond and GameStop. With Bed Bath & Beyond short interest rising to about 53% from 47% one month ago, in keeping with data from analytics firm S3 Partners, there could possibly be an additional squeeze on the horizon.

“If bankruptcy shouldn’t be in Bed Bath & Beyond’s future, its rallying stock price will force an enormous short squeeze and short sellers will rush to the doors and buy-to-cover as a way to retain a few of the mark-to-market profits they earned in 2022,” Ihor Dusaniwsky, head of predictive analytics at S3 Partners, wrote in a research note.

Bed Bath & Beyond tumbled 83% in 2022 in its worst 12 months on record, in keeping with data compiled by Bloomberg going back to 1993.

The retailer has the second largest short interest as a percentage of float for stocks with over $10 million of short interest, behind only Silvergate Capital Corp., Dusaniwsky said. But one key difference between Bed Bath & Beyond and other crowded shorts is the increasing likelihood of a bankruptcy filing.

“If the specter of bankruptcy becomes more of a certainty, the prospect of a Bed Bath & Beyond short squeeze becomes less and fewer, we are able to expect minimal short covering as short sellers wait for a $0.00 stock price,” he wrote.

Despite the recent rally, Bed Bath & Beyond stays down greater than 90% from a peak of $52.89 through the meme stock frenzy about two years ago.

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