Heavily shorted stocks surged again this week as retail investors revived the meme stock playbook, adding pressure to short sellers and accelerating a market rally that has pushed the S&P 500 up 25% since April. Names like Krispy Kreme, GoPro, Opendoor Technologies, and Kohl's led gains, with some stocks posting double-digit percentage moves over consecutive sessions.
Krispy Kreme (NASDAQ:DNUT) jumped 33% Wednesday, extending a 27% surge from Tuesday, as traders piled into call options and short interest climbed to as high as 30% of float. GoPro shares rose 47%, fueled by similar interest, while Beyond Meat gained 10.4%, with over 35% of its shares shorted. On Tuesday, Kohl's spiked 37.6%, ranking as one of the most discussed tickers on retail investor platforms.
"Expect continued short side losses as the economy grows, despite increased tariffs, and interest rates finally decline later this year," said Ihor Dusaniwsky, managing director at S3 Partners.
Since the April 8 market bottom, short sellers have lost approximately $355 billion, including $100 billion in losses since May 22, according to S3 data. That includes more than $35 billion in losses against the "Magnificent Seven" tech stocks - a cohort that has led the broader rally.
The resurgence of meme stocks is part of a broader "mispositioning" theme, according to Trend Labs founder JC Parets. "These economists had everyone convinced a recession was coming," Parets wrote, citing an April Wall Street Journal poll that showed nearly half of economists expected a recession within 12 months. "So far, that downturn has not come to pass."
Opendoor Technologies (NASDAQ:OPEN), up 440% this month, fell 11% Wednesday, but remains one of the top-performing names in the recent wave. Call option volume on Krispy Kreme exploded to over 100,000 contracts Tuesday - 71 times the average daily volume of the past four years, according to Bloomberg. GoPro's call volume hit a three-year high with more than 56,000 contracts traded.
Bespoke Investment Group noted the 100 most shorted stocks in the Russell 1000 Index have outperformed the index itself by over 30 percentage points over the past three months. "Reminiscences of 2021," Bespoke analysts wrote in a research note, referencing the original meme stock mania.
Day traders on Reddit and Stocktwits are now scanning for the next potential targets. High short interest names including Campbell's, Aehr Test Systems, Polaris Inc. (NYSE:PII), and Wendy's (NASDAQ:WEN) have seen elevated attention in recent sessions.
Liz Ann Sonders, chief investment strategist at Charles Schwab, said on Yahoo Finance, "A lot of what has outperformed significantly [since the market bottom], obviously the memes, but the heavily shorted stocks of every variety. So I think there may be that also added attempt on the part of the retail trader to press those shorts and force a repositioning."
