Bed Bath & Beyond may be headed for ‘meme squeeze’
Troubled home goods retailer Bed Bath & Beyond may be heading for “me-squeezing,” says analyst Ihor Dusaniwsky of S3 Partners.
Bed Bath & Beyond Inc. BBBY,
On Tuesday it announced the closure of nearly 130 stores in an effort to solve its financial problems. The company announced the closings, along with third-quarter results that missed higher and lower analyst estimates, just days after saying it may need to declare bankruptcy.
Although the company TroublesBed Bath & Beyond stock ended Tuesday’s session up 19.4% and continued to enjoy the largest percentage gain ever gain Wednesday. The stock rose 12.5% Thursday, outperforming the S&P 500’s SPX,
gain of 0.02%.
Related: The bankruptcy expert says other businesses will feel the impact of closing Bed Bath & Beyond stores
“We haven’t seen [Bed Bath & Beyond] Short squeeze in 2023 ahead of the +50% price move today, but if the stock continues higher, we could see some near-term sellers exit their positions and start reaping (realizing) the profits they made in 2022,” Dusaniwsky, managing director of predictive analytics at S3 Partners, in a note released Wednesday. [Bed Bath & Beyond] And other congested short positions are that there is a clear threat of bankruptcy, which may encourage short positions to hold onto their positions, incur some temporary losses, and wait for this rally in anticipation of a $0.00 share price in bankruptcy.”
In the memo, Dusaniwsky said Bed Bath & Beyond’s short interest is $82.7 million, or 39.93 million shares sold short, which is 52.07% of the short interest. Bed Bath & Beyond has the second largest stock float interest short interest with over $10 million in short interest in the US, second only to Silvergate Capital Corp. SI,
According to S3 Partners research.
The shorts have been active at Bed Bath & Beyond, with 25.1 million new short sales since hitting a 2022 high early in the year of $27.23 on March 29, according to S3 Partners. That’s a 169% increase in the total shares sold short as the company’s share price collapsed by 91%. Over the past 30 days, S3 Partners has seen 3.8 million new shares shorted, a 10.4% increase in total shares shorted, as the share price fell 33%.
Also read: With the specter of bankruptcy looming for Bed Bath & Beyond, what’s next for the troubled retailer?
“[Bed Bath & Beyond] It is becoming less institutional and more fragmented on the long side with significant institutional activity on the short side,” Dusaniwsky wrote, noting that the vast majority of shorting is done by institutions. “This combination makes for a volatile stock because fundamentals are not the primary driver of price movements — The stock is getting more momentum and a technical name – sudden price swings of such magnitude would not be out of the ordinary.”
Analysts see that The specter of chapter 11 looms large on the retailer. Last week’s announcement that the darling of the stock meme at some point might need to file for bankruptcy sent Bed Bath & Beyond stock toward a 30-year low and followed a turbulent few years marked by Strategy slipsburn coins , challenge Basic business trends and the impact of the COVID-19 pandemic.
Read now: The Bed Bath & Beyond bankruptcy warning is the latest chapter in the downward spiral facing the troubled retailer
If the threat of bankruptcy becomes more certain, selling pressure on Bed Bath & Beyond becomes less likely, with minimal hedging of short positions as short sellers wait for a $0.00 share price, according to Dusaniwsky. But if bankruptcy is not in the future, the company’s stock price hike will put massive short pressure and short sellers will rush to the doors and buy to cover in order to keep some of the profits they made in the market in 2022, he added.
Dusaniwsky called the situation facing Bed Bath & Beyond stock “very binary” in a phone interview with MarketWatch. “Either you have pressure on the M as retail investors push the stock higher, [and] The pressure will force the short covers to push the stock higher,” he said. “Or the stock is going bankrupt or there is a low-priced takeover offer.”
Of the nine analysts surveyed by FactSet, three have a hold rating and six have an underweight or sell rating for Bed Bath & Beyond.