Wendy’s is set to be the latest ‘meme stock’ as shares rise 26% and Reddit users rave that the chain’s new summer salad will be a game-changer
- Wendy’s shares rose Tuesday as small traders on Reddit plunged into the stock
- WallStreetBets users cheered the stock and praised the chain for its ‘tendies’
- It follows ‘meme stock’ surges in shares of AMC and GameStop
Shares of Wendy’s rose Tuesday after small traders cheered the stock and fueled the next “meme stock” rally.
Wendy’s stock ended the session up 25.85 percent on the day, at $28.87, after individual traders on the Reddit discussion board WallStreetBets snapped up shares in a buying frenzy.
The rally appears to have been spurred on by a post late last week that rudely joked about paid sex acts that took place behind a container at the fast food chain, in comments that were widespread on the board and sparked a surge of interest.
Other Reddit users raved that Wendy’s witty social media presence is giving the company an edge, speculating that the new “summer salad” announced Monday would boost profits.
Shares of Wendy’s surged Tuesday after small traders cheered the stock and fueled the next ‘meme stock’ rally
A five-day overview of Wendy’s stock shows stock price rising Tuesday
One user, who goes by the name Chillznday, wrote: ‘They just came out with their new summer salad. Experts are already saying that this salad is the salad of the summer.’
The person also tied Wendy’s to the earlier “meme stock” frenzy in GameStop stock, noting that the two companies had responded with jokes on Twitter.
Reddit users also praised Wendy’s for their “tendies,” or fried chicken tenders, a long-standing community joke.
Other companies that have seen their stock values rise and fall in meme-driven action include AMC Entertainment, Blackberry, and GameStop.
AMC shares ended the session roughly flat on Tuesday, but remained 47 percent higher than a week ago.
GameStop, which holds its annual shareholders’ meeting and reports quarterly results on Wednesday, rose 7 percent.
Some Reddit users speculated that the new Wendy’s ‘summer salad’ announced Monday would boost profits
Clover Health was also up 86 on Tuesday as Reddit traders saw it as an opportunity for another short squeeze rally.
Medicare-backed insurance vendor Clover was one of the stocks with the most short positions on the US stock exchanges, with Clover being the target of a report by short seller Hindenburg in February, who took a position in the company.
“The WallStreetBets forum (on Reddit) has identified (stocks with) more than 30% short stakes,” said Thomas Hayes, managing member at Great Hill Capital LLC in New York.
Its short stake in Clover Health stands at 49.10 million shares, or 43.5 percent of the float, Ihor Dusaniwsky, director of predictive analytics at S3, said Tuesday.
Shortsellers fell $465 million in mark-to-market losses Tuesday, based on price gains of more than 80 percent, pushing losses so far to $517 million, he said.
Shorts have built up their position in Clover Health as the stock price has risen, Dusaniwsky said.
Clover’s lender, venture capitalist Chamath Palihapitiya, floated the company in a $3.7 billion reverse merger with his blank check company in October 2020.
The “meme stock” phenomenon, which started in January with video game retailer GameStop and spread to movie theater operator AMC in May, has prompted the U.S. Securities and Exchange Commission to say it is investigating signs of market manipulation.
What are meme stocks? How Reddit Users Wanted To Punish Short Selling Hedge Funds
Meme stocks are companies that are popular with a new generation of social media-focused amateur traders on Reddit’s WallStreetBets and other online forums.
The users have used apps like Robinhood to buy up stock in the failures of our aging companies as a way to punish hedge funds that had bet against them en masse.
The first big winner was Game Stop, the video game retailer, which saw its shares rise more than 1600% in January.
GameStop was one of the most shorted stocks on the market, with more contracts to short sell the stock than there were stocks available.
Short selling is a tool often used by hedge funds. It allows an investor to profit when the price of a stock falls. Short sellers borrow a stock, sell the stock, and then buy the stock back to return it to the lender.
Reddit users saw an opportunity for what’s known as a “short squeeze,” where rising stock prices force short sellers to buy more of the stock to cover their losses.
Users of the Reddit group WallStreetBets urged members to buy and hold GameStop shares, locking up the stock and forcing desperate hedge funds to bid ever higher to cover their shorts.
Meme stocks are inherently very risky as the massive inflation pushes the value of the company way above its true value.
Some small investors lost hundreds of thousands pouring their savings into GameStop stock, only to see the bubble burst in February.
Other popular meme stocks include AMC, which boomed in June, as well as Bed Bath & Beyond, Blackberry and Koss Corp.