what happened
share of memetic strains AMC Entertainment Holdings (AMC -9.69%), smile direct club (SDC -3.31%)When sundial grower (SNDL -2.69%) were down 9.5%, 3.6% and 1.9% respectively at 3:40 pm ET today.
There was no news today specifically about these memetic strains. However, another meme strain’s potential bad news seems to have put other WallStreetBets crowd favorites up for sale.
So what
Companion memestock Bed Bath & Beyond (BBBY -19.63%) It had plunged about 23% as of 3:40 p.m. ET after major shareholder Ryan Cohen filed last night. Cohen filed a Form 144, revealing Cohen’s 8 million shares through the sale of his options purchased earlier this year and his intention to sell an additional 1.45 million shares.
Keep in mind that Cohen is still making a decent profit despite today’s drop. Bed Bath & Beyond’s stock surged about 300% in his first half of August. This is because amid declining inflation and crashing stock prices, meme his traders seem to be re-entering the market.
It’s a little strange to lump a household goods retailer with movie theater operator AMC. SmileDirectClub sells do-it-yourself dental aligners. Sundial Growers is a Canadian cannabis producer that has recently expanded into alcohol sales. However, these stocks are all part of the group that rose to fame amid the memetic stock craze in 2021. It happened when I identified a very short-sold company that could be narrowed down.
These technical factors therefore group these stocks together and trade almost as their own sector. Similar to Bed Bath & Beyond, these three stocks of his have also surged since the beginning of the month.
AMC month-to-date total returns (daily) data from YCharts
Why did Cohen’s filing upset these other stocks? game stop, invested in a beaten-down gaming retailer, looking to transform its business. Cohen also held other meme stakes like Bed Bath & Beyond.
Other investors may have been informed that Bedbath & Beyond’s price was too frothy after seeing the files filed by memetic stockists to cash out their holdings. This could be an indication that other meme stocks whose share prices are similarly rising may have gone too far and too fast.
so
As early August showed, memetic stocks could make exciting moves in the short term. However, as we have shown today, they can also go down pretty quickly. Where are each stock standing after today’s drop?
AMC looks risky at the moment ahead of a special dividend to shareholders of ‘APE’ preferred stock. At this time, it is unclear how much AMC is looking to raise and what price his APE shares will trade.In addition, Cinema Pier cine world group The stock plunged more than 50% yesterday after admitting that it may need to raise highly diluted shares to fend off bankruptcy amid a disappointing late-summer movie slate.
Meanwhile, SmileDirectClub could face liquidity issues later this year and may have to raise cash after recently reporting disappointing results and a disappointing 2022 outlook. SmileDirect ran out of $112 million in cash by the first half of this year, leaving him with only $158 million in cash against $790 million in debt. But on the bright side, the company’s new artificial intelligence-based phone app, which could significantly streamline customer acquisition costs, is due out later this year or early next year.
Sundial may seem counterintuitive given its status as a small cannabis grower and retailer in Canada, but it is actually the least risky. The company reported strong revenue growth last quarter, much of it due to its acquisition of Alcanna, a liquor store retailer that closed in March.
Still, Alcanna is profitable, helping make up for continued losses in the cannabis segment, and Sundial has about $363 million in unrestricted cash and no debt. During that time, the company has made numerous investments in other cannabis companies, either independently or through joint ventures, in the form of debt and convertible bonds, contributing $480 million. Sundial’s deal is well below book value and looks like a bargain given the lack of debt, but investors don’t really know what the future holds for this business. Maybe that’s why it was the memetic strain that recovered the most later.
Billy Duberstein has no positions in any of the mentioned stocks. His clients may own shares in the companies mentioned. The Motley Fool has no positions in any of the companies mentioned. The Motley Fool’s U.S. headquarters has a disclosure policy.