Bed Bath & Beyond, AMC rally with GameStop as little investors squeeze hedge funds in more stocks

Signage is displayed outside of a Bed Bath & Beyond Inc. store in Los Angeles, California, U.S., on Monday, Sept. 19, 2016.

Patrick T. Fallon | Bloomberg | Getty Images

Bed Bath & Beyond and AMC Entertainment are the newest targets of speculation for retail investors, creating a nightmare scenario for hedge funds betting against these once beat-up stocks.

Shares of Bed Bath & Beyond popped as much a 40% and shares of AMC Entertainment soar as much as 70% on Monday, as individual investors pile into the names while hedge funds rush to cover their losses from shorting the stocks. Shares of Bed Bath & Beyond were last up 7% and AMC was last up 25%.

The pair joins GameStop, which rose more than 100% on Monday, in their short-squeeze rallies. Troubled video came retailer GameStop has rallied 325% in January alone, skyrocketing to over $150 a share at one point on Monday. The stock’s rally doesn’t seem to be slowing down despite valuation concerns from Wall Street firms. Shares of GameStop shortly wen25negative in midday trading on Monday.

Short squeezes are happening all over the market, largely orchestrated by motivated retail stocks buyers who are explicitly trying to crush Wall Street shorts. The rookie investors are using online chat rooms and websites to garner information and support, pushing these embattled stocks to the brink.

“What we are seeing is an interesting clash between retail investors and the big institutions,” said Delano Saporu, founder of New Street Advisors Group. “The cheerleading and strong emotions from both sides is creating an environment of emotion-based investing.”

GameStop has about 138% of its float shares borrowed and sold short, the single most shorted name in the U.S. stock market, according to FactSet citing the latest filings.

In another sign of the rampant speculation going on, options volume on the SPDR S&P Retail ETF as of 10 a.m. Monday was about 13,000, more than usual, according to Susquehanna’s Chris Murphy. The 20-day average daily volume is about 20,000. GameStop is a component, about 3% of the SPDR ETF.

GameStop is the most actively traded stock on Fidelity on Monday, with AMC also earning a top spot. Buy orders for GameStop are outnumbering sell order by nearly three-to-one.

Bed Bath & AMC

Bed Bath & Beyond is trailing GameStop but also has major short interest, with 64% of its float shares tied up in short bets. When a large portion of a stock’s shares are sold short, it leaves it vulnerable to a so-called short squeeze where hedge funds betting against the stock have to rush back in to buy the shares or risk further losses.

The retailer is up 150% this year alone.

“Well there goes BBBY–incredibly.. shorts are on the run… wallstreetbets on the case?,” CNBC’s Jim Cramer tweeted on Monday, referring to a popular Reddit page where young investors plan and plot.

“It’s the ‘wallstreetbets’ people.’ And they have ganged up, arguably allowed by free speech purposes, to center on a few stocks,” Cramer added on “Squawk on the Street.” “I’ve never seen the guns like this. They can break shorts.”

AMC Entertainment has about 24% of its float tied up in short interest, and the stock is surging on Monday after the company disclosed that it had secured enough financing to remain open and operational deep into 2021 on Monday.

The largest movie theater chain in the world has raised $917 million of new equity and debt capital, the company revealed in an SEC filing. Around $500 million of this fundraising came from the issuance of new common shares. However, its uncommon for an equity to jump on news of a stock issuance. Usually the new share supply would weigh on the stock. During these speculative times, the share raise has the opposite effect.

“We will continue to see a battle of hope and optimism in retail investors versus the old guard clinging to fundamentals and metrics,” added Saporu.

Reddit favorites

Another popular subject on Reddit Monday is BlackBerry, which soared more than 30% in morning trading. One of the top posts under the red-hot “wallstreetbets” Reddit forum featured a meme with BlackBerry at the GameStop “refueling station.”

BlackBerry rallied 25% last week after report that it had settled a patent-royalty dispute with Facebook.

BlackBerry “is not aware of any material, undisclosed corporate developments and has no material change in its business or affairs that has not been publicly disclosed that would account for the recent increase in the market price or trading volume of its common shares,” BlackBerry said in a statement on Monday.

Other highly-shorted names are popping on Monday. Shares of National Beverage are up 11%, shares of Macerich popped 21% and Tanger Factory Outlet and Tootsie Roll Industries rallied 8% and 11%, respectively.

Shares of Children’s Place gained 9% and iRobot surged 18% on Monday.

Another name showing signs of a possible short squeeze is residential solar installer SunPower. Shares of the company, which has a market cap of nearly $9 billion, jumped more than 14% on Monday before turning negative. Part of this could be short sellers scrambling to cover their position, since the stock’s short interest is relatively high at 53% of float, according to data from FactSet.

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— with reporting from CNBC’s Yun Li, Pippa Stevens and Patti Domm.

Source: CNBC