Meme stocks were on the move again Wednesday, with several members of the club rising strongly in premarket trading before dropping shortly after the market opened. ContextLogic, the company behind the discount e-commerce website Wish.com, was among the biggest movers, while Clover Health Investments initially added to its gains from earlier in the week before dropping into the red.
ContextLogic stock (ticker: WISH) closed down 8.9% on Wednesday, at around $10.60, after being up more than 25% in early trading. The shares were moving on heavy volume: Some 305 million changed hands on Wednesday, versus the stock’s average daily volume of 13 million.
Clover stock (CLOV) closed down 23.6% after giving back a 30% surge seen in early trading. The shares rose 86% on Tuesday and 32% on Monday.
Users on Reddit’s WallStreetBets forum were touting the opportunity for a short squeeze in ContextLogic and Clover stocks on Wednesday. Both stocks recently had a relatively large percentage of their shares sold short, meaning that traders have been betting on them to decline.
Closing those positions requires buying shares. The Reddit crowd’s tactic has been to pile into stocks with high short interest, cause the prices to rise, and force short sellers to buy more shares, which would add fuel to the gains.
Sticking it to the short sellers has been a rallying cry for many of the at-home stock traders who have burst onto the scene in 2021. How much of the rise in meme stocks’ prices in recent months is due to that hoped-for phenomenon, rather than simply buying demand from retail investors and options hedging, is impossible to say.
Most other meme-stock poster children also fell on Wednesday. AMC Entertainment Holdings (AMC) dropped 10.4%, GameStop (GME) added 0.9%, and BlackBerry (BB) slipped 4.1%. Wendy’s (WEN), which soared 26% on Tuesday, gave back some of those gains to close down 12.7% on Wednesday.
Also getting attention on WallStreetBets on Wednesday were Workhorse Group (WKHS), which jumped 8.5%, and Virgin Galactic Holdings (SPCE), which closed down 6.2%.
AMC has taken advantage of its roughly 3,000% rise since the start of 2021 by selling hundreds of millions of dollars of new stock to recapitalize its balance sheet and tide its business over while movie theaters were shut during the Covid-19 pandemic.
GameStop, the original meme stock, reports its quarterly results after the close on Wednesday. Management declined to comment on the action in its stock on its most recent earnings call and took no questions from Wall Street analysts.
The videogame retailer plans to shift from a predominantly bricks-and-mortar presence to an e-commerce-focused strategy, but it hasn’t provided details. Chewy (CHWY) co-founder and large GameStop investor Ryan Cohen is set to become chairman of GameStop’s board after its annual meeting Wednesday afternoon.
The S&P 500 and Nasdaq Composite closed down 0.2% and 0.1%, respectively, on Wednesday.
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