Bed Bath & Beyond Shares are up 50% on Monday Morning – Here’s Why

Ticker symbol: BBBY

Shares in Bed Bath & Beyond Inc, the home and beauty retailer, are surging by over 50% in the morning trading session. This comes on the heels of a 32% jump on Friday, and a 160% jump over the past couple weeks. Bed Bath & Beyond is one of the “meme” stocks that retail traders focused in on last year, along with companies such as GameStop and AMC Entertainment. Shares in those companies were up 12.4% and 17.5%, respectively.

The recent bounce in meme stocks could be related to the improved broader investor sentiment in the stock market. The Nasdaq 100, for example, has bounced almost 20% from the lows the index hit on June 16^th. Meme stocks such as Bed Bath & Beyond and GameStop are considered “high beta” stocks. High beta stocks generally follow the trend of the market, but at a significantly increased amplitude. In other words, during bull markets, high beta stocks outperform, and in bear markets, beta stocks underperform the broader market.

Another reason for the recent gains in these stocks could be related to the concept of a
short squeeze. A short squeeze happens when high levels of short positions on a stock cause a swift increase in the stock price as short sellers are forced to buy back shares to close their positions or meet margin calls. As the demand for shares goes up, more and more short sellers are forced to buy shares, pushing prices higher and higher.

Bed Bath & Beyond had a short interest of close to 45% of its free float, as of July 15^th, according to data from Markit Securities. Any short interest of above 20% is considered abnormally high. Traders on social media website Reddit, have been known to systematically target companies with a high short interest as well. When traders collectively decide to push shares higher, it can trigger violent bouts of price movements in the underlying companies.

Bed Bath & Beyond was one of the most talked about shares recently on Reddit. The company reported no additional news recently, and there were no filings submitted with the Securities and Exchange Commission outlining any material changes at the company. The retailer did announce management changes in June, including the departure of the Chief Executive Officer. Bed Bath & Beyond shares are down roughly 61% from their 52-week high.

This content is provided for general information purposes only and is not to be taken as investment advice nor as a recommendation for any security, investment strategy or investment account.