GameStop, Mattress Bathtub & Past's shares are rising on short-busting, in keeping with Jim Cramer
CNBC's Jim Cramer on Thursday commented on the big price hikes from two long-time retailers.
Stocks of Bed Bath & Beyond rose nearly 19% during the session, a number outpaced by the 27% rally at GameStop, whose shares saw three double-digit gains this week alone, to levels they've seen since about six Years has not been achieved.
"Like it or not, right now we have a bull market in a short time, and I bet you will see more stories like GameStop and Bed Bath," said the Mad Money host. "I don't recommend playing them."
GameStop, a video game company, caught the interest of shoppers to hear that online pet food company Chewy co-founder and former CEO Ryan Cohen, an activist investor, would join its board of directors, a sign that the company is entering the digital age after years trouble could occur. The stock gained more than 12% to open the week on Monday before rising again on Wednesday, up 57%. This was the biggest win in a day since the game retailer was founded in 2002.
Cramer linked the surge in GameStop's value to a short squeeze in which a stock price grows exponentially, carried by short sellers placing bets that stocks would fall. Market participants can place short bets by borrowing and selling stocks in hopes of buying them back at lower levels before returning the stocks to a lender, making a profit on the difference in price changes. A stock that rises instead creates losses for the borrower.
Additional support for the climb comes from enthusiastic young investors who use social media sites like Reddit for stock ideas and bidding on the stock, he added.
"Right now when you go to these sites … they are populated mostly by younger readers and subscribers who openly and frankly plan to blow the shorts on this one by buying GameStop at all costs and the stock Bid high and high to crush the shorts so they have to cover yourself, "Cramer said. "It's amazing to see. I think they are succeeding beyond their wildest dreams."
Bed Bath and Beyond's shares also burned with the help of social media investors looking to break short sellers' plans, Cramer said. The retailer, which has gone through a turnaround plan by closing poorly performing stores, has grown 54% in value this year, closing Thursday's session at $ 27.34.
More than 60% of Bed Bath & Beyond's shares are of little interest, while about 140% of GameStop's shares have been sold short, according to FactSet.
"I don't really like short bashing and that sort of thing feels incredibly sketchy to me," said Cramer. "But you know what? I can't deny that it works."
In Thursday's session, all three major averages fell.