Highly shorted Krispy Kreme, GoPro surge in latest meme stock frenzy

Reuters

4 days ago

July 23 (Reuters) - Krispy Kreme (DNUT.O), opens new tab and GoPro (GPRO.O), opens new tab were among the companies riding the latest meme stock rally on Wednesday, as retail traders latched on to the highly shorted names a day after piling into the shares of department store company Kohl's.
Individual investors are betting on riskier pockets of the market, including cryptocurrencies, as U.S. stocks soar to record highs on signs of a resilient economy and easing trade tensions.
Shares of doughnut chain Krispy Kreme, whose nearly 32% of free float have been shorted, jumped 25% to $5.17, adding to a nearly 27% surge on Tuesday. Action camera maker GoPro soared 62% to a three-month high of $2.20.
Plant-based meat company Beyond Meat (BYND.O), opens new tab gained 10.4%.
"The common denominator seems to be stocks with high short interest again, sub-dollar stocks and they get moving somehow," said Joe Saluzzi, partner and co-founder at Themis Trading.
"The valuations (in U.S. stocks) are certainly at the upper level at this point. It's a market that's had to run and people are excited about it."
The rally revived memories of the Reddit-driven meme stock frenzy of 2021 when amateur investors pushed up shares of video-game retailer GameStop (GME.N), opens new tab and cinema chain AMC (AMC.N), opens new tab, burning hedge funds that were on the other side of the trade.
Opendoor Technologies (OPEN.O), opens new tab, an e-commerce platform for residential real estate, has soared more than 400% this month and is among the first companies to draw retail interest this time.
Some market participants attributed the rally to bullish X.com posts from last week by EMJ Capital portfolio manager Eric Jackson, who said his hedge fund had taken a position in Opendoor, projecting the stock to hit $82 in the longer term.
Opendoor was last down 11% at $2.56. EMJ Capital did not immediately respond to a Reuters request for more details on their position in the company.
Reddit's r/WallStreetBets, the 40th largest subreddit with 19 million members, was abuzz with screenshots of bullish bets on Opendoor and Kohl's by amateur traders.
The growing interest in heavily shorted stocks comes after Kohl's (KSS.N), opens new tab surged 37.6% on Tuesday, with the highest daily inflow from mom-and-pop traders in about three years, Vanda Research data showed.
Kohl's fell 6.2% and is now the second most trending ticker on Stocktwits, a retail investor-focused social media platform.
Online gifts retailer 1-800-Flowers.Com (FLWS.O), opens new tab, which has a short interest on 71.66% of free float, jumped 23.1%. Moves in Beyond Meat and 1-800-Flowers.Com were most susceptible to a short squeeze, Ortex said.
"With both stocks moving higher in premarket, the probability of that dynamic kicking in is rising, especially for BYND, where borrow demand is already high," Ortex's Peter Hillerberg said.
A short squeeze occurs when investors who had sold borrowed shares in the hopes of making money from a share price decline are forced to buy shares to close their losing positions.
About a quarter of total U.S. stock market orders are attributable to retail traders, J.P.Morgan data showed.