The recipe is strictly the same. A year and a half after the GameStop and AMC stock price frenzymembers of the WallStreetBets forum on Reddit are back with a new target. Bed Bath & Beyond (BBBY), a US Nasdaq-100 index company, saw its stock soar more than 70% yesterday. A variation which occurs at a time when analysts had revised their forecasts downwards, to an action below 5 dollars.
Plagued by investors betting on the downside, members of the WallStreetBets forum therefore embarked on a full-scale rally. Before noon in New York, already more than 188 million shares had been traded. To trigger the movement, we find the entrepreneur and activist investor Ryan Cohen. Since his many massive purchases of GameStop shares to support the course of the company, the billionaire has created a big influence within the community.
What is the WallStreetBets forum?
In a note shared to Forbes, B. Riley analyst Susan Anderson wrote that Bed Bath & Beyond has “recently caught the attention of retail investors again on Reddit’s WallStreetBets forum, which gained notoriety during the GameStop saga in January 2021”.
But who are these individuals? To summarize (because they were several million at the time of the peak a year and a half ago), the members of the forum are individuals who are looking to know in which company to invest in order to earn money. To increase the price of a share, all place buy orders to bend institutional investors forced to do the same to cover their losses. A collective organization for individual ends, as you will have understood.
Trading in the Bed Bath & Beyond (BBBY) share was suspended several times in session on Tuesday August 16 because of such violent fluctuations. At the highest, the title gained 70%, to finally close at 29% up. In five days, the company has already won over 94% and its valuation now reaches 1.34 billion dollars, enough to erase its losses since March.
Ryan Cohen owns 10% of the outstanding shares and has already bought 1.6 million call options at prices between 60 and 80 dollars. Understand by this that the investor is betting for the price of the action of Bed Bath & Beyond to reach such levels in the long term. A vision that runs counter to that of Wall Street analysts who rather favor sell orders to bet on the fall in the share price.
Like what we saw at the start of 2021, retail investors in the forum (and elsewhere) are therefore back with an identical method. Recipe : choose a listed company and in the future threatenedrefine its choice among companies where institutional investors have already decreed that it should bet down and no longer support its price, then find a leader to motivate the entire community to place buy orders en masse to reverse the price trend.
Towards a new short squeeze?
If history repeats itself as with GameStop, then Bed Bath & Beyond could see its price explode even more by a short squeeze phenomenon. For all investors betting on the downside, a way to hedge their losses and place buy orders (phenomenon of gains on one side which compensate for the losses on the other). Thus, the action of the company is all the more prized by the demand for purchase and the prices can thus experience exponential growth.
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With the decline of GameStop and AMC Theaters, investment firms and analysts are now more concerned with the power of the WallStreetBets forum. Although they always talk about “unrealistic valuations”as Susan Anderson, a B. Riley financial analyst wrote in an exchange with Forbes, these massive purchases are able to offer a “long term lifeline” companies whose future was threatened. For now, the financial results of Bed Bath & Beyond are very poor. But this capital contribution could be an opportunity to invest.