It appears members of the infamous r/WallStreetBets subreddit on Reddit are targeting Barnes and Noble (BNED) stock. Indeed, the downtrodden book retailer closed up by more than 70% on Tuesday, hinting at a potential short squeeze in the making.
What’s happening with BNED stock?
Well, for a company that has only continued to shed value this year, today’s jump truly came out of nowhere. Indeed, the book seller has struggled financially for years, even closing some locations and marking down prices. BNED stock is down 65% so far this year, trading at around just 50 cents per share — and that’s after today’s surprise spike.
It’s completely unclear what’s driving BNED’s jump, which points to an organized effort from retail investors to raise the company’s share price as part of a potential short squeeze.
A short squeeze works by buying up large quantities of a security that many investors hold short positions on. By buying up the stock and forcing its price up, short investors are “squeezed” into selling their ownership to avoid further losses, which in turns raises the share price even more. BNED stock, perhaps predictably, has a high short volume ratio.
Short squeezes have become a more common occurrence in the past several years, in large part because of the power of organized individual investors found on the likes of r/WallStreetBets and related investment forums.
While there’s no explicit post on the forum pointing to an organized effort, plenty of X users have suggested that the notorious subreddit may be playing a role in the surge.
BNED Stock Experiences Surprise Surge Following Recapitalization Offer
Today jump is something of a continuation of last Friday’s rally. Indeed, BNED stock soared 126% on Friday after Greenhaven Road Investment Management made a $84.5 million recapitalization offer to the retailer. However, Greenhaven already owns a nearly 10% stake in BNED.
BNED stock actually fell 16% on Monday, a temporary reprieve before today’s rally re-run.
As it stands, it’s unclear where shares of Barnes and Noble are headed. But if this recent movement is any indicator, expect plenty of volatility from the stock.
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On the date of publication, Shrey Dua did not hold (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.
