Meme-Stock Traders: Damn the Fundamentals! Full Speed Ahead!

Meme-stock investing means never having to say you’re sorry. Or at least never having to say you’re wrong.

That’s the obvious conclusion to be drawn from the reactions to today’s dismal news from Bed, Bath, and Beyond on the r/wallstreetbets subreddit, Ground Zero for the meme-stock craze. Over the last month, as I wrote about for The Atlantic last week, Bed, Bath, and Beyond (BBBY)’s stock has gone on an absurd ride, sextupling from $5 a share to $30 a share before tumbling all the way back down to $9 a share last week.

The engine for that huge move upward? Meme-stock traders who began piling into the stock at the beginning of the month, generating a short squeeze. Even now, it’s totally unclear why these traders decided it was time to buy Bed, Bath, and Beyond when they did. There’s been nothing but bad news about the company for months. Sales have fallen sharply year-over-year, its CEO and CFO quit in late June, and bankruptcy rumors have been whirling around it.

But BBBY had been a meme-stock darling during the bubble of 2021, and at the beginning of August it fit the profile of the kind of stock the denizens of wallstreetbets like: it had a low share price (meaning you could accumulate relatively large positions for not much money), it was heavily shorted, and the investor Ryan Cohen (who played a central role in the rise of the original meme stock, GameStop, and is now chairman of that company) owned a big stake in it and had been agitating for change for months. And once traders started buying it, and the price started rising, shorts started covering, which drove the price higher, which attracted more buying interest, and so on.

It was all fun while it lasted. But then, last week, everything came crashing down. Cohen made a public filing saying that he intended to sell all his shares, and the following day news came that he already had sold all his shares. That sent the stock down 67% in two days.

You might think Cohen’s exit, and the stock’s precipitous decline, would have disabused meme-stock traders of the idea that Bed, Bath, and Beyond would soon be a $60 stock. But you would be wrong. A few days after Cohen dumped his stake, BBBY secured a $600 million loan. This was not a positive sign about the business…