The search for the next meme stock has brought investors to another company that has truly fallen from grace. WeWork (NYSE:WE) made headlines as one of the market’s newest game-changers just a few short years ago. Now it is the subject of documentaries and a dramatic TV series that tell the story of a company that rose too fast and fell even faster. Founder and CEO Adam Neumann captured the world’s attention when he introduced the co-working company in 2011, which ultimately received a valuation of $47 billion. But when his reckless actions put the company at risk, he could only stand back and watch as his empire collapsed.
Today, WE stock trades at just $0.20 per share, but it has seen a slight resurgence lately as retail investors have taken an interest in the struggling microcap.
Flagging a fallen company as their next rescue mission is par for the course for the r/WallStreetBets crowd. But investors should be careful before jumping into WeWork. The company’s recent performance is similar to that of Bed Bath & Beyond (OTCMKTS:BBBYQ), a company that failed almost as badly, if not more.
What’s Happening With WE Stock
After weeks of struggling, WE stock is finally rising today on interest from meme stock investors. As noted, it fits the meme stock criteria, at least in part. The company has fallen significantly over the past year, losing more than 96% of its value. It recently issued warnings of bankruptcy, which likely enticed retail traders even more. But even the r/WallStreetBets crowd should know that WeWork isn’t a good investment.
Sometimes short squeezes can lead to temporary gains for retail investors who’ve pumped money into an unstable meme stock. But data from Fintel makes it clear that a WeWork short squeeze isn’t likely. Short interest accounts for just over 2% of the stock’s float. That doesn’t suggest that a looming squeeze could drive WE stock, even temporarily. This means that when the stock inevitably comes crashing down, as it will, the retail traders who pumped it up today will take a hit.
Investors should take a lesson from Bad Bath & Beyond. The home furnishing retail once stood among industry leaders with stores across the country and share prices above $60. Now the company is bankrupt and has fallen so far that it lost its spot on the Nasdaq. After delisting, it began trading on an over-the-counter (OTC) exchange, something that generally makes investors lose confidence in a stock. While WeWork still trades on the New York Stock Exchange, it has received non-compliance notices, suggesting that a similar fate may be imminent.
Since it declared bankruptcy and delisted, Bed Bath & Beyond has been closing up stores and selling off its remaining assets. The company has also come under fire from Senators Elizabeth Warren and Cory Booker, who assess that it has failed to pay severance to many laid-off workers. Essentially, everything can go wrong for a failing public company has done so for BBBYQ stock.
What It Means
Many signs point to the sad fact that WeWork is careening toward becoming the next Bed Bath & Beyond. That’s not a title that any company should want.
Retail investors may see WE stock as an investment vehicle they can resurrect, but nothing suggests that such a scenario is likely. Shares are already coming down from where they were earlier today. Although WeWork will finish this week in the green, it will likely fall back to where it belongs in the near future. When it does, investors who still own WE stock will be left holding the same bag as those who still refuse to sell their BBBYQ holdings.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
