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GME, BBBY, BBIG: What Caused the Trading Halts?

GameStop, Bed Bath & Beyond, and Vinco Ventures all enjoyed sudden rallies recently. Why were the stocks so volatile?
  • During the August 16 trading session, movement in GameStop, Bed Bath & Beyond, and Vinco Ventures triggered volatility halts.
  • These so-called "meme stocks" closed the trading session strong as bullish retail investor sentiment pressured short sellers.
  • GME, BBBY, and BBIG have been targeted by short sellers in recent months due to questionable business fundamentals.
Figure 1: GME, BBBY, BBIG: What Caused the Trading Halts?

Figure 1: GME, BBBY, BBIG: What Caused the Trading Halts?

Read more: BBBY Stock: Did GameStop Chairman Ryan Cohen Anticipate the Rally?

What Is a Volatility Halt?

The August 16 trading session was an eventful one for meme stocks. Retail investors piled into Bed Bath & Beyond  (BBBY) - Get Bed Bath & Beyond Inc. Report, GameStop  (GME) - Get GameStop Corporation Report, and Vinco Ventures  (BBIG) - Get Vinco Ventures Inc. Report, crushing short sellers and triggering volatility halts.

When a stock moves too quickly in either direction, it can trigger a volatility halt. When this happens, trading in the stock automatically stops for five minutes. During this time, it's impossible to buy or sell the stock.

Volatility halts are quite common. They help keep the market at an even keel and prevent flash crashes.

Let's take a look at what happened in the three meme stocks on the 16th.

Bed Bath & Beyond

Bed Bath & Beyond has been a big "meme" star during the last few weeks. With short sellers selling over 40% of its modest float, BBBY is a short-squeeze story.

Bed Bath & Beyond's retail business has been struggling amid unfavorable macro conditions and a valuation considered "stretched" by many Wall Street experts.

Along with GameStop and AMC Entertainment  (AMC) - Get AMC Entertainment Holdings Inc. Class A Report, Bed Bath & Beyond was one of the meme stocks that retail investors sent skyrocketing during the "Meme Stock Market Event" of January 2021.

But in recent weeks, BBBY's popularity has grown again on Reddit forums like r/wallstreetbets. As a result, retail investors have sent the stock on a rally of over 360%.

The founder of the r/wallstreetbets subreddit said that recent BBBY trading activity is another "short massacre" in the markets:

During the August 16 trading session, BBBY shares jumped more than 70%.

Jim Cramer, whom meme stock investors consider a kind of nemesis, believes it was a good opportunity for Bed Bath & Beyond to do an equity offering:

GameStop

GameStop is considered the original meme stock. It was at the center of the Meme Stock Market Event and was the target of one of the biggest short squeezes in history.

The event devastated several hedge funds that had bet against GME — including Melvin Capital. And GameStop continued to trade at an unusually high price for more than 18 months after the short squeeze.

GameStop has a huge community of supporters on Reddit. Its stock tends to run parallel to other meme stocks, as well moving with retail investor sentiment. Typically, when Bed Bath & Beyond's stock rises, so does GameStop's.

It's also worth mentioning that GameStop Chair Ryan Cohen owns a large stake in BBBY as well.

GameStop has also been reaping the rewards of its 4-for-1 stock split on July 21. Although stock splits have no effect on the fundamental value of a company, these events often trigger short-term rallies.

Vinco Ventures

Vinco Ventures, whose business model focuses on aggressive acquisitions, may not be as popular as other meme stocks. But it has been the subject of several short squeezes.

Shares of Vinco Ventures have been the target of growing short-selling activity in recent months, and retail investors on Reddit are keeping an eye on the stock. The stock has plunged nearly 80% since its last major short squeeze in January 2022.

Vinco Ventures' biggest recent acquisition is Lomotif, a social media company that hosts short video content, similar to TikTok.

A few months ago, Vinco Ventures was back in the news after announcing that it will distribute shares of its Cryptyde (TYDE)  subsidiary to BBIG shareholders via a special dividend.

However, it looks like Vinco Ventures' recent rally was due to Reddit investors affecting a short squeeze, rather than any news about its business.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)