Is the meme stock trend back? – Stock Market News

On Sunday, Bed Bath & Beyond announced that its chief financial officer, Gustavo Arnal, had committed suicide. This tragic event occurred amid a period of economic turmoil for the chain, which is also facing a lawsuit over accusations of artificially boosting its share price in a "pump and dump" scheme, with Arnal being potentially involved in the scandal. However, many market participants attributed these abnormal fluctuations in the firm’s equity price to retail investors driven by the meme stock mania. Is this trend still alive in the post-pandemic period?

What is the meme stock mania?

Meme stocks are essentially stocks that become famous among individual investors via social media. Usually, a group of day traders would band together to inflate share prices of companies that Wall Street is betting against. These coordinated attacks are often perceived as a form of revenge against hedge funds, which are believed to have been historically gaining on the back of retail traders.

This trend had been particularly popular during the pandemic as the excess liquidity provided by central banks allowed investors to take on risky bets. Nevertheless, there are emerging clues that the meme stock mania is still active.

Bed Bath and Beyond case

The recent death of the firm’s executive happened two days after the company announced plans to close 150 of its stores, while it would be also laying off 20% of its staff. Interestingly though, a lawsuit recently filed in the District of Columbia exposed that the firm could be a victim of a ‘meme trade’. Specifically, the share price plummeted after it was made known that the activist investor, Ryan Cohen, had exited his position in the firm, gaining approximately $58 million.

This story started in mid-August when despite the company’s unexpectedly negative Q2 earnings report, the stock price of the beaten-down retailer surged by as much as 500% to a high of around $29. Unsurprisingly, the positive momentum evaporated rapidly as it soon became clear that the rally was not backed by any positive changes in the firm’s financial performance or growth prospects, but it was most likely driven by forum traders.

Technical picture

Taking a technical look, Bed Bath & Beyond’s stock had been exhibiting significant volatility and huge spikes in August, without any significant news behind those moves. Moreover, in the last couple of days, the share price has retread and crossed below its 50-day simple moving average (SMA), even though the firm announced a restructuring plan, indicating that investors remain pessimistic about the company's prospects.

Should the negativity persist, the price could move towards its 2022 low of 4.30. On the other hand, a resurgence of the meme stock mania could propel the share towards the 15.00 mark.

Is the trend here to stay?

Forum traders' darlings including GameStop and AMC Entertainment fell on the same day that billionaire Ryan Cohen abruptly dumped his stake in Bed Bath & Beyond, erasing a huge chunk of their summer gains in just a couple of sessions. These moves spurred speculations that the meme stock movement did not die out alongside the pandemic stimulus era.

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