Reddit is back in action: Wendy's stock surged 30% following the GameStop scenario
The market is once again witnessing a classic meme frenzy: shares of the burger chain Wendy’s (WEN) surged nearly 30% in a single trading session. The rally was sparked by the WallStreetBets community on Reddit, which employed the same coordination tactics used in the famous GameStop saga of 2021.
At the session's peak, the price of one Wendy’s share reached $8.89. The abnormal volatility was so high that exchanges halted trading at least once. Notably, this surge occurred against a backdrop of declining sales for the restaurant chain, underscoring the purely speculative nature of the move.
The Mechanics of a Short Squeeze: How It Works
The scenario unfolded according to a familiar pattern. It all started with a post on WallStreetBets, where the author urged to "save Wendy’s before it's too late." This was followed by reports of stock and option purchases. As a result, the daily trading volume exceeded 202 million shares — 15 times the recent average.
This jump was the largest single-day gain since March 2020. The key catalyst was short positions: before the rally, about 23% of Wendy’s shares were sold short. For comparison, in the case of GameStop, that figure exceeded 140%. Nevertheless, even 23% is enough to trigger a chain reaction: a sharp price increase forces major players to cover shorts and hastily buy back assets, further accelerating the stock price.
Fundamental Backdrop: Hope for a New CFO
Interestingly, beyond the speculative frenzy, the rally also has a fundamental underpinning. A significant event was the appointment of Steve Cirulis as Wendy’s chief financial officer. He previously successfully managed finances at the Potbelly chain, where, alongside current Wendy’s CEO Bob Wright, he increased the company's market capitalization more than fivefold.
The arrival of a new management team fits perfectly into the classic scenario of a meme stock surge. It is part of a global plan to revitalize the chain called Project Fresh. Retail investors see this as a real chance for a major business turnaround, which fuels their enthusiasm.
Operational Problems Remain
However, one should not forget the actual state of affairs. In the first quarter, comparable restaurant sales in the U.S. fell by 7.8%, and net profit dropped to $22.7 million. Quarterly results were only slightly better than analysts' pessimistic forecasts.
The current rise in stock prices is driven by investor emotions, not by real business successes. History already knows a similar case: in June 2021, Reddit users also targeted Wendy’s, and the stock rose 26% in a day. However, a few weeks later, the rally completely fizzled out due to an insufficient volume of short positions to sustain the squeeze.
My opinion: Currently, Wendy’s has a real volume of shorts, providing strong momentum. But historical experience shows that Reddit-fueled assets often quickly lose their gained ground. Whether the upward trend continues depends solely on the long-term interest of retail players, which in this case is extremely unreliable.