Shares of Bed Bath & Beyond Inc (NASDAQ:BBBY) skyrocketed in premarket trading, climbing as much as 30% before the opening bell after a report that the retailer was in the process of securing a loan to pay down some of its debt.
Sources reportedly told The Wall Street Journal that Bed Bath and Beyond hopes to secure a loan of around $375 million.
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Before this month, investors had no good news about the company's business in a while, and it looked like it may be up for liquidation. However, Bed Bath & Beyond is now considered a "meme stock," which is a stock that is popular among retail traders and soars due to interest from amateur investors rather than anything to do with the company’s fundamentals.
What Is Meme Stock All About?
Perhaps the original meme stock was GameStop (NYSE:GME). In 2021, investors started discussing GME on social media and Reddit message boards. Due to this, more and more people bought the retailer’s shares, and the stock price began to increase.
The same thing is now happening with BBBY. In mid-August, investors started discussing BBBY stock on the Reddit message board, and since then, the company has been in the news because its stock has soared by 500% even though it is near bankruptcy. By July, BBBY's stock was trading at around $5. By mid-August, it had skyrocketed to nearly $30.
Many retail investors bought BBBY shares and decided to hold the stock instead of selling it. This phenomenon is called “diamond hands” in the language of Reddit traders. All of this is causing the increased volatility in the stock’s price.
Bed Bath And Beyond’s Current Situation
Recently, Bed Bath and Beyond hired a restructuring specialist to evaluate its situation and determine whether it would survive or not. The specialist’s evaluation suggested that bankruptcy may be imminent. Additionally, the company's stock price has been volatile due to the involvement of retail investors.
