Reddit is back at it again: a meme-stock assault on Wendy’s shares following the GameStop playbook.
Last Wednesday, shares of fast-food restaurant chain Wendy’s (WEN) surged nearly 30%. The cause was a classic meme short squeeze, initiated by members of the WallStreetBets subreddit. The scenario, painfully reminiscent of the legendary GameStop rally in 2021, worked again, albeit on a smaller scale.
At the peak of the trading session, the price of one Wendy’s share approached $8.89. The abnormal volatility was so high that exchanges suspended trading at least once. Notably, this surge occurred against the backdrop of the chain's ongoing operational decline—sales at comparable restaurants are falling.
Mechanics of the Rally: From a Post to Mass Buying
The movement started with a post on WallStreetBets, whose author called to "save Wendy’s before it's too late." It was followed by an avalanche of messages reporting purchases of shares and options. The frenzy was confirmed by the numbers: over 202 million shares were sold and bought in a single day—15 times the average daily trading volume recently.
This spike became the largest single-day gain for Wendy’s since March 2020. The day before, the stock was trading around $6.26—just above a multi-year low.
The key catalyst was the presence of short positions. According to S3 Partners, about 23% of Wendy’s shares were shorted before the rise. This is more modest than GameStop during its historic short squeeze (over 140%), but enough to trigger a chain reaction. Major players, fearing losses, began covering shorts and hastily buying back assets, which further drove up prices.
Fundamental Backdrop: Hope for Management Change
However, the current rise is not solely due to retail investors. A significant fundamental event was the appointment of Steve Cirulis as Wendy’s Chief Financial Officer. He previously successfully managed finances at Potbelly, where, in tandem with current Wendy’s CEO Bob Wright, he increased the company's market capitalization more than fivefold.
The change in top management fits perfectly into the classic meme stock scenario: the arrival of a new team associated with a successful business turnaround fuels speculative interest. Cirulis is part of a global plan to revitalize the chain called Project Fresh.
Nevertheless, operational issues have not disappeared. In the first quarter, comparable restaurant sales in the U.S. fell by 7.8%, and net profit dropped to $22.7 million. The results were only slightly better than analysts' pessimistic forecasts.
Historical Lesson: Can Wendy’s Hold Its Ground?
This is not the first time Reddit has targeted Wendy’s. In June 2021, users called the chain an excellent candidate for WallStreetBets, after which shares rose by 26%. However, a few weeks later, the rally completely fizzled out due to an insufficient volume of short positions.
The current wave of growth is backed by real short volume, providing strong momentum. But historical experience shows that assets hyped by Reddit users often quickly lose their gains. Whether the upward trend will persist depends solely on long-term interest from retail players.
My analysis: The Wendy’s scenario is a vivid example of how coordination among retail investors can temporarily reverse market dynamics, even with weak fundamentals. However, investors should remember: a meme rally without backing from real business improvements is a zero-sum game, where most participants risk being left empty-handed, as was the case in 2021.