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Jared Dillian

Latest Meme-Stock War Is Hedge Fund Versus Hedge Fund

The latest spike has all the making of a short squeeze orchestrated by big investors, not a loose legion of lightweight day traders. 

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Meme Stock Frenzy Not Surprising: WallStreetBets Founder

Meme stocks have enjoyed something of a renaissance in recent days. A prime example is Bed Bath & Beyond Inc., which soared as much as 75% between Friday and early Tuesday for no apparent reason. AMC Entertainment Holdings Inc. and GameStop Corp., two other meme stocks, also saw big gains. This latest episode is more evidence that the meme-stock phenomenon just won’t die, completely ignoring any semblance of fair value and continuing to frustrate short sellers. Then again, maybe the problem is short sellers.

The number of shares sold short in these and other meme stocks would suggest that a lot of people have come to the conclusion that their underlying businesses are worth zero. So, the thinking is that you short the shares and wait for the companies to go bankrupt. The problem is that stocks don’t go to zero because they are bad businesses; they go to zero because they encounter a liquidity crisis and run out of cash. (I should know as I worked at Lehman Brothers Holdings Inc. when it collapsed.) It is very difficult for a publicly traded company to run out of cash. They can borrow, issue more stock and tap a credit line, among other things. CEOs have many options at their disposal to prevent the stock from going to zero.