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Newest Meme Stocks Extend Gains With No Sign of Craze Fading

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·4 min read
Newest Meme Stocks Extend Gains With No Sign of Craze Fading
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(Bloomberg) -- Another batch of names has been added to the meme-stock frenzy as retail traders latched on to their latest favorites Wednesday.

Prison operator GEO Group Inc. soared 38% and Clean Energy Fuels Corp. jumped 32%, supplanting names like ContextLogic Inc. and Clover Health Investments Corp. that had led the charge higher on Tuesday. In Europe, Air Berlin jumped 138% after surging 54% the day before. Meanwhile, shares of fast-food restaurant chain Wendy’s Inc. reversed gains from Tuesday after both Northcoast and Stifel downgraded the stock to hold-equivalent recommendations from buy.

Read more: Prisoners Are the Latest Meme Stock Fad as Geo Jumps

Trading in so-called meme stocks took off this week, with chatter building on WallStreetBets and other social media platforms on the potential for short squeezes as investors in the forums rallying against short sellers.

Speculative frenzy among the Reddit-favorite names has been especially pronounced as a broader stock market hasn’t gone anywhere for most of the past month. While shares of AMC Entertainment Holdings Inc. and Workhorse Group Inc. have jumped at least 80% in June, the Russell 3000 Index has advanced less than 1%.

“The meme stock craze is a liquidity phenomenon,” said Matt Maley, chief market strategist for Miller Tabak + Co. “This is far from just something that the Reddit traders are playing in. There are a lot of momentum-based hedge funds (with algos) that have a lot of money pushing these things around.”

Robinhood, Meme Stocks and Investing as a Game: QuickTake

Options volume has picked up amid the recent exuberance in some meme stocks. Daily single stock option volume increased to about $383 billion in the past week, Barclays analyst Maneesh Deshpande said in a note.

“One of the surprising dynamics in the past week has been the steepening of single stock skew (in the rest of the universe) as the retail options activity picked up and demand for upside calls on meme stocks increased,” Deshpande said in the report.

On Wednesday, U.S. Securities and Exchange Commission Chairman Gary Gensler called for the agency to undertake a review of the stock market’s structure, including so-called best execution requirements. This comes after the SEC said earlier this week that it’s scrutinizing markets for signs of manipulation as meme stocks continue to surge.

GameStop Corp., which reported first-quarter earnings after market, whipsawed in the extended session after saying it plans to file with regulators to sell up to 5 million shares of common stock in an “at-the-market” offering. The company also announced that it had hired Amazon.com Inc. executives Matt Furlong and Mike Recupero to be chief executive office and chief financial officer, respectively.

Earlier, at the video-game retailer’s annual meeting, newly-elected chairman Ryan Cohen gave a shoutout to the retail traders that have been fueling the stock’s rally. “We’re fortunate to have such a special group of investors holding the company’s shares,” he said. Shares of the video-game retailer have surged more than 1,500% this year.

Wendy’s was downgraded to hold from buy at Stifel, which said the stock’s valuation now fully reflects the growth it had been assuming to reach its target price of $25. Analyst Chris O’Cull said in a note that he’s still “constructive toward the company’s fundamental outlook.”

Most-Shorted U.S. Stocks Have Surged 36% in Past Month: Chart

Other stocks that were big gainers today and have high short interest as a percentage of float, according to IHS Markit Ltd.:

Atomera Inc, with 12% in short interest, has gained 19% WednesdayCleveland-Cliffs Inc. surged 15% and has short interest of 23%Clovis Oncology Inc. has short interest of 34% and increased 11% todayInovio Pharmaceuticals Inc. jumped 17% Wednesday and has a short interest of 26%Invesco Mortgage Capital Inc. increased 18% Wednesday and has a short interest of 12%Root Inc., with 14% in short interest, has gained 19% WednesdayTriterras Inc. rallied 16% and has a short interest of 12%World Wrestling Entertainment Inc. added 11% and has a short interest of 23%Ziopharm Oncology Inc. has short interest of 14% and climbed 12%

(Updates with closing prices throughout, adds details on GameStop earnings.)

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