They were here for a short time, not a good time.
I bought a property last week. It’s priced soared 90% on Monday, but then on Tuesday it crashed by 50%.
No, that didn’t happen. That doesn’t happen to property.
But it does happen to shares.
And it does happen to “meme-stock” shares like Bed, Bath & Beyond.
That’s what happened on Monday last week. Bed, Bath and Beyond (BBBY) shares pumped a massive 90%.
Why?
Because the company announced that it might have to consider going bankrupt.
“The company continues to consider all strategic alternatives including restructuring or refinancing its debt, seeking additional debt or equity capital, reducing or delaying the company's business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures, including obtaining relief under the U.S. Bankruptcy Code.”
“These measures may not be successful.”
Screaming buy, right?
Not for any normal company, but BBBY isn’t a normal company. It’s a meme-stock. It copped a massive lift after GameStop (the mother of all meme-stocks) CEO Ryan Cohen bought a 10% share in the company, and retail buying triggered a massive short squeeze.
That sent the share price to destination moon in 2021…
… even though the company had hopeless prospects back then too.
And that’s the thing about meme-stocks. It doesn’t matter what the fundamentals are. The worse the better in some ways.
All the matters is that it’s ‘buzzy’ and there’s a lot of short interest.
So that’s what we got. We BBBY announced they were close to bankruptcy, the price surged.
But the following day, they announced they had a plan to avoid bankruptcy.
And the price tanked.
(Yeah, there’s not a lot about this story that makes sense.)
But basically, they were going to raise fresh capital, issue new shares, and massively dilute the existing share pool.
Like, they’re going to raise a billion dollars, and increase the number of shares 8-fold.
And even then, most analysts don’t think that will save them.
So it looks like its bye-bye BBBY.
And I also think this means we’re coming to the end of the meme-stock era. Most naive retail investors who bought into GameStop, AMC and BBBY have lost their shirts.
(If only there was a place to buy discount linen.)
They got burnt.
They won’t be rushing into trades like that again any time soon.
And for me, it’s just one of the key lessons of wealth creation.
Don’t make fads the core of your strategy.
Sure, have a bit of fun with it. Throw some into crypto. Throw some into meme stocks.
But don’t over-invest your time. Stay focused on the strategies that you know deliver results in the long-run.
Take the time you would have spent watching Tik-Toks about meme-stocks, and become an expert in property investing or property development (for example.)
Everyone wants the get-rich-quick lifestyle. Everyone wants the Lambo.
But you’re playing with fire.
Invest in what you know works.
And let everything else be entertainment.
JG.