Wendy’s becomes the latest ‘meme stock’ as shares soar 26% and Reddit users rave the chain’s new summer salad will be a game-changer
- Wendy’s shares soared on Tuesday as small traders on Reddit piled into the stock
- WallStreetBets users cheered the stock, praising the chain for its ‘tendies’
- It follows ‘meme stock’ surges in shares of AMC and GameStop
Shares of Wendy’s surged on Tuesday after small traders cheered the stock and drove the next ‘meme stock’ rally.
Wendy’s shares finished 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 by a post late last week that crudely joked about paid sex acts occurring behind a dumpster at the fast-food chain, in remarks that spread widely on the board and spurred a wave of interest.
Other Reddit users raved that Wendy’s witty social media presence gives the company an edge, and speculated that the new ‘summer salad’ it announced on Monday would drive profits higher.
Shares of Wendy’s surged on Tuesday after small traders cheered the stock and drove the next ‘meme stock’ rally
A five-day view of Wendy’s stock shows the share price surging on Tuesday
One user, who goes by the name Chillznday wrote: ‘they just came out with their new summer salad. Experts are already stating that this salad is the salad of the summer.’
The person also tied Wendy’s into the prior ‘meme stock’ frenzy in GameStop shares, noting that the two companies had interacted with jokes on Twitter.
Reddit users also praised Wendy’s for their ‘tendies,’ or fried chicken tenders, a longstanding inside joke in the community.
Other companies that have seen their stock values soar and fall in meme-driven action include AMC Entertainment, Blackberry and GameStop.
AMC shares ended the session roughly flat on Tuesday, but remained up 47 percent from a week ago.
GameStop, which holds its annual shareholder meeting and reports quarterly results on Wednesday, was up 7 percent.
Some Reddit users speculated that the new Wendy’s ‘summer salad’ announced on Monday would drive profits higher
Clover Health also surged 86 on Tuesday as Reddit traders identified it as an opportunity for another ‘short squeeze’ rally.
Medicare-backed insurance seller Clover was among the most shorted stocks across U.S. exchanges, with Clover being the target of a report by short seller Hindenburg in February, which took a position in the company.
‘The WallStreetBets forum (on Reddit) has identified (stocks with) over 30% short interests,’ said Thomas Hayes, managing member at Great Hill Capital Llc in New York.
Short interest in Clover Health is at 49.10 million shares, or 43.5 percent of the float, Ihor Dusaniwsky, managing director of predictive analytics at S3 said on Tuesday.
Short sellers were down $465 million in mark-to-market losses on Tuesday, based on a more than 80 percent price gain, which raised year-to-date losses to $517 million, he said.
Shorts have been building their position in Clover Health as its stock price has been rallying, Dusaniwsky said.
Clover’s backer, venture capitalist Chamath Palihapitiya, took the company public through a $3.7 billion reverse merger with his blank check firm in October 2020.
The ‘meme stock’ phenomenon, which began with video game retailer GameStop in January and spread to cinema operator AMC in May, has prompted the U.S. Securities and Exchange Commission to say it was looking into signs of market manipulation.
What are meme stocks? How Reddit users set out to punish short selling hedge funds
Meme stocks are companies popular with a new generation of social media centric amateur traders on Reddit’s WallStreetBets and other online forums.
The users have been using apps such as Robinhood to buy up shares in failing our outdated companies as a way to punish hedge funds that had bet massively against them.
The first major winner was video game retailer Game Stop, which saw shares rise more than 1,600% in January.
GameStop was one of the most heavily shorted stocks on the market, with more contracts to sell the stock short than there were shares available.
‘Short selling’ is a tool often used by hedge funds. It allows an investor to profit when the price of a share drops. 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 is known as a ‘short squeeze’, in which rising share 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 stock, locking up the supply of shares and forcing desperate hedge funds to bid higher and higher to cover their shorts.
Meme stocks are inherently very risky because the huge inflation pushes the value of the company well over what it is actually worth.
Some small investors lost hundreds of thousands when they poured their savings into GameStop shares, only to see the bubble burst in February.
Other popular meme stocks are AMC, which has seen a massive surge in June, as well as Bed Bath & Beyond, Blackberry and Koss Corp.