Retail Traders Fuel Bed Bath & Beyond's Latest Burst

Bed Bath & Beyond Inc. continued to surge on Thursday, rising for a fourth day and hitting the highest level since early November. The company’s bankruptcy warning has reignited interest from retail traders.
Shares in the home-goods retailer soared as much as 29% on Thursday, extending the company's gains to 166% over the past three trading sessions. Other so-called meme stocks also posted strong gains on Thursday, with Carvana Co. climbing 17%. Meme-stock poster-children AMC Entertainment Holdings Inc. and GameStop Corp. saw more modest gains.
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Retail traders have been driving the latest surge in the markets, funneling millions of dollars into Bed Bath & Beyond and other companies. These investors have been snapping up stock and pumping their bets on social media websites and chatrooms. According to Vanda Research, these investors have purchased more than $7.3 million of Bed Bath & Beyond stock since the markets closed on January 4.
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On Thursday, there were more buy orders for GameStop stock than for any other stock except Tesla, according to Fidelity's platform. This is part of a trend we've seen in recent days, with touts on platforms like Reddit's WallStreetBets and Stocktwits driving up retail buying.
There has been a surge in net purchases for meme stocks recently. This is likely due to the popularity of these stocks among online communities and the potential for high returns.
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Volatility in Bed Bath & Beyond has soared since the company warned last week that it may need to file for bankruptcy. The stock’s ten-day volatility hit the highest level in at least five years, surging past levels seen when meme-stock mania captivated investors in early 2021. Bed Bath & Beyond’s situation is dire, and investors are clearly worried about the company’s future.
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In the past, individual investors have joined forces on social media to drive down stock prices of short sellers. This has led to massive rallies in stocks like Bed Bath & Beyond and GameStop. With Bed Bath & Beyond's short interest rising to 53% from 47% last month, according to data from S3 Partners, there could be more of these squeezes in the future.
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Ihor Dusaniwsky, head of predictive analytics at S3 Partners, wrote in a research note that if bankruptcy is not in Bed Bath & Beyond's future, its rallying stock price will force a massive short squeeze and short sellers will rush to the doors and buy-to-cover in order to retain some of the mark-to-market profits they earned in 2022.
Bed Bath & Beyond had its worst year on record in 2022, with a 83% drop in its share price, according to data from Bloomberg. This was the biggest annual decline for the company since 1993.
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According to Dusaniwsky, Bed Bath & Beyond has the second largest short interest as a percentage of float for stocks with over $10 million of short interest, behind only Silvergate Capital Corp. However, one key difference between Bed Bath & Beyond and other crowded shorts is the increasing likelihood of a bankruptcy filing.

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"If the threat of bankruptcy becomes more of a certainty, the prospect of a Bed Bath & Beyond short squeeze becomes less and less likely. Short sellers will likely wait for the stock price to hit $0.00 before covering their positions."
Despite the recent rally, Bed Bath & Beyond remains down more than 90% from its peak of $52.89 during the meme stock frenzy about two years ago.