TLDR
- Krispy Kreme jumped 26.7% on Tuesday and an additional 23% in premarket Wednesday trading
- The stock has 32.2% of its free float shorted, making it a target for retail traders seeking short squeezes
- No company news drove the rally – it’s part of a broader meme stock movement targeting heavily shorted names
- GoPro, Beyond Meat, and 1-800-Flowers also surged as traders piled into high short interest stocks
- Krispy Kreme recently cut its dividend and ended its McDonald’s partnership due to poor performance
Krispy Kreme shares are having their sweetest moment in months, but it has nothing to do with doughnut sales. The stock rocketed 26.7% on Tuesday and jumped another 23% in premarket trading Wednesday.
The surge comes as retail traders on social media platforms target heavily shorted stocks. Krispy Kreme fits the bill perfectly with 32.2% of its free float in short positions.
The meme stock phenomenon that made headlines in 2021 appears to be making a comeback. Traders are once again hunting for beaten-down companies with high short interest, hoping to trigger short squeezes.
Short sellers borrow shares and sell them, betting the price will fall. When the stock rises instead, they’re forced to buy shares back at higher prices to close their positions. This creates additional buying pressure that can send prices soaring.
Krispy Kreme wasn’t alone in Tuesday’s rally. Camera maker GoPro surged over 41% to around $2 per share. The action continued Wednesday with GoPro gaining another 45% in premarket trading.
Meme Traders Target Multiple Names
Beyond Meat joined the party with a 15.6% jump despite having 38% of its float shorted. Online retailer 1-800-Flowers.Com climbed 14.1% with a whopping 71.66% short interest.
Data analytics firm Ortex noted that Beyond Meat and 1-800-Flowers face the highest probability of short squeezes. “With both stocks moving higher in premarket, the probability of that dynamic kicking in is rising,” said Ortex’s Peter Hillerberg.
The current rally follows Tuesday’s explosive move in Kohl’s, which surged 37.6%. The department store chain saw its highest daily inflow from retail traders in about three years, according to Vanda Research.
Kohl’s remained a hot topic on Stocktwits, ranking as the second most trending ticker on the retail investor platform. The stock continued its volatile trading Wednesday, up 1.8%.
No Fundamental News Behind The Move
What makes Krispy Kreme’s surge particularly striking is the absence of any positive company news. In fact, recent developments have been decidedly negative.
The company’s first-quarter results in May were disappointing across the board. Management was forced to cut the dividend and terminate its partnership with McDonald’s after the collaboration proved unprofitable.
Krispy Kreme’s debt load has swelled to $935 million while the company operates at a loss under standard accounting measures. Demand has been softer than expected throughout the year.
These struggles explain why short sellers had increased their bets against the stock. Short interest reached 14.2% of total shares outstanding and 26.4% of the publicly traded float as of June 30.
Pandemic-Era Trading Returns
The current meme stock revival echoes the trading frenzy that gripped markets during 2021 lockdowns. Amateur investors, armed with stimulus money and commission-free trading apps, targeted struggling companies with high short interest.
GameStop and AMC became the poster children of that era, with retail traders burning hedge funds on the other side of those trades. The strategy worked then because coordinated buying pressure forced short sellers to cover at painful losses.
This time around, Opendoor Technologies had been one of the month’s biggest winners before giving back some gains. The real estate platform fell 5.6% Wednesday after rising more than five-fold in July.
The return of meme stock trading highlights how retail investors continue seeking opportunities in heavily shorted names. Social media coordination remains a powerful force capable of moving markets, especially in smaller, more volatile stocks.
Krispy Kreme’s Wednesday premarket gains suggest the rally may have more room to run, at least in the short term.
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