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Business

Cathie Wood’s ARK Faces Loyalty Test After Tech-Stock Rout

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Cathie Wood

says the high-risk stocks in the exchange-traded funds sold by ARK Investment Management LLC are so cheap that they will inevitably rise. A surprising number of investors are willing to give it a shot.

Over the past week, with prices in the

ARK Innovation ETF

back at mid-2020 levels, investors have put about $168 million into the fund, boosting its net assets to $11.8 billion, according to FactSet. It is a noteworthy vote of confidence for a fund that has dropped 27% this month and lost half its value over the past year, as its brand of investing in largely unprofitable, untested firms has fallen out of favor.

What happens next at the ARK Innovation fund, which goes by the ticker ARKK, and other risky investments like it will help tell the story of financial markets in 2022. The most speculative assets, ranging from ARK and many of its holdings to so-called meme stocks such as

GameStop Corp.

and

AMC Entertainment Holdings Inc.

to cryptocurrencies like bitcoin, soared during the pandemic thanks to the enormous sums governments and central banks poured into the economy to counter the impact of lockdowns. Now those gains are eroding as the Federal Reserve prepares to begin raising U.S. interest rates as soon as March.

That is prompting a shift of investor behavior, causing a rethink of the sky-high valuations markets had attached to growth stocks. The result is a pullback from the riskiest assets and a repricing of even big technology stocks.

Ms. Wood’s ETFs are at the epicenter of the selloff that has pushed the S&P 500 down 7% and the Nasdaq Composite off 12% just four weeks into 2022. Worst hit have been the shares of technology and biotech firms that generate little to no profit, yet carry high valuations—the kind of companies Ms. Wood’s ARK favors.

Some of the holdings of the ARK Innovation ETF are down more than 50% from their recent highs, including

Spotify Technology SA,

Block Inc.,

Zoom Video Communications Inc.

and

Roku Inc.

Ms. Wood insists the fund’s holdings are due to rebound. “After correcting for nearly 11 months, innovation stocks seem to have entered deep value territory, their valuations a fraction of peak levels,” she wrote in a blog post last month.

SHARE YOUR THOUGHTS

Can the ARK Innovation fund rebound? Join the conversation below.

Larry Carroll,

a financial adviser at advisory firm Wealth Enhancement Group in Rock Hill, S.C., still has some $18 million of client money in ARK Innovation after first buying shares in 2018. The firm manages about $55 billion across portfolios of stocks and bonds, with Mr. Carroll using ARK Innovation as a way of offering some clients exposure to hot tech companies.

Thanks to ARK’s sharp run-up in the early stages of the pandemic, he says he has already pulled more money out of the fund than he originally put in, leaving him comfortable maintaining a significant position in expectation that depressed shares will bounce back.

“The real question has been should we be buying more,” said Mr. Carroll. “I’ve resisted the urge mainly because I don’t think you’ll see ARK and the disruption stocks do well in this environment.”

Funds that beat the market often go through periods in which they lag behind, though the scale of ARK’s ups and downs makes it stand out. Investors have pulled a net $1.4 billion from ARK funds over the past month, the most redemptions of any U.S. ETF issuer, according to data from FactSet. That has pushed net outflows over the past six months to more than $8 billion, more than all the net outflows experienced by other ETF managers over the same period.

Some $16 billion flowed into ARK Innovation from the second quarter of 2020, when the Covid-19 pandemic took hold, through the first quarter of 2021, when the fund’s assets peaked at $28 billion. Investors who have bought in since then have been losing money, said

Vincent Deluard,

director of global macro strategy at

StoneX Group Inc.

Renato Leggi,

a client-portfolio manager at ARK, said some investors have started to agree with Ms. Wood’s assessment over the past week and are buying shares. She said the firm’s strategy requires that investors take a long-term view.

But

Klaus Derendorf,

a 50-year-old business-development executive from Los Angeles, said he sold his ARK Innovation fund shares in November and has boosted his cash holdings after losing about 20% in the fund in less than a year. “I gotta go back to real fundamentals,” he said.

Ms. Wood’s early returns gained her a large following on YouTube, Twitter and other social-media platforms.

Joe Seid,

a 58-year-old sales director from Chicago, bought ARK Innovation shares at the end of 2020, in part because he saw her on TV and his financial adviser flagged the fund as one of the hottest in the market. He sold last year after losing 10% of his investment and now thinks he might have gotten carried away.

“For me, these were way too speculative,” Mr. Seid said. “It didn’t really jibe with more core financial beliefs.”

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

GameStop Entering NFT and Cryptocurrency Markets as Part of Turnaround Plan

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GameStop Corp.

GME 1.28%

is launching a division to develop a marketplace for nonfungible tokens and establish cryptocurrency partnerships, according to people familiar with its plans, pushing the company into much-hyped areas as it tries to turn around its core videogame business.

The retailer has hired more than 20 people to run the unit, which is building an online hub for buying, selling and trading NFTs of virtual videogame goods such as avatar outfits and weapons, according to the people. The company is asking select game developers and publishers to list NFTs on its marketplace when it launches later this year, the people said.

GameStop also is close to signing partnerships with two crypto companies to share technology and co-invest in the development of games that use blockchain and NFT technology, as well as other NFT-related projects, the people said. The retailer expects to enter into similar agreements with a dozen or more crypto companies and invest tens of millions of dollars in them this year, the people said.

Grapevine, Texas-based GameStop has been working to reset its business after years of losses. The company was at the center of a stock-trading frenzy last year that dramatically boosted its share price, which rode a surge in interest and optimism from individual investors. Many saw potential in GameStop despite the pandemic’s negative impact on foot traffic and even though consumers have been increasingly opting to download and stream games over the internet, rather than buy the kind of hard copies that the company specializes in selling.

Last year, GameStop overhauled its executive team and board of directors, naming activist investor

Ryan Cohen

as chairman. Mr. Cohen, who co-founded online pet-products retailer

Chewy Inc.

and sold it for $3.35 billion in 2017, has been pushing to make GameStop more tech-centric.

The turnaround effort has yet to show significant results in GameStop’s financial performance. In the quarter through October, the company said revenues grew, but its loss widened compared with the same period a year earlier. The revenue growth came from sales of hardware and accessories, while revenue from game software slipped 2%.

“We believe our emphasis on the long term is positioning us to build what will ultimately become a much larger business,” GameStop Chief Executive

Matt Furlong

said on an earnings call with analysts last month. Mr. Furlong, who joined the company last year from

Amazon.com Inc.,

then mentioned that GameStop was exploring business opportunities involving blockchain and NFT technologies.

There are signs some investors are losing patience. GameStop shares have plunged by more than 45% over the past six weeks, though the stock remains far above where it was when investors started piling into GameStop shares a year ago.

Terms like “nonfungible token,” “minting,” “gas fees” and more sound like a foreign language to you? To better understand it—and explain it—WSJ’s Joanna Stern turned her son’s art into an NFT on the Ethereum blockchain. Photo illustration: Jacob Reynolds

Diving into the crypto and NFT space puts GameStop on a rapidly growing list of companies trying to cash in on these nascent and largely unproven technologies. A handful of NFT marketplaces already exist and some feature tokens from game publishers. Earlier this week, a marketplace called OpenSea said it raised $300 million in venture capital and is now valued at $13.3 billion, greater than GameStop’s valuation of close to $10 billion.

The videogame industry is likely to play a major role in the adoption of cryptocurrency, NFTs and blockchain technology, analysts say. Gamers are expected to be among the first to embrace the technologies because they are already spending a lot on virtual goods. Virtual real estate in videogames, as well as videogame collectibles, are a rapidly growing segment of the NFT market.

In recent weeks, some of the industry’s biggest publicly traded videogame companies have launched or announced plans to sell NFTs, including

Ubisoft Entertainment,

Zynga Inc.

and

Square Enix Holdings Co.

Some industry executives and players, though, have expressed concerns about the value of NFTs and developers’ motives for creating them.

By getting into the crypto and NFT space while it is still in its infancy, GameStop hopes to avoid missing out on opportunities to be part of a budding trend as it did with computer-game downloads about a decade ago, the people familiar with its plans said. GameStop tried to get into the streaming of videogames at the time but abandoned the effort. Today, the downloading and streaming of games are rapidly growing trends.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Robinhood Agrees to Pay $70 Million to Settle Regulatory Investigation

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WASHINGTON—Robinhood Financial LLC has agreed to pay nearly $70 million to resolve sweeping regulatory allegations that the brokerage misled customers, approved ineligible traders for risky strategies and didn’t supervise technology that failed and locked millions out of trading.

The enforcement action is a blow to the fast-growing online brokerage, which was launched in 2014 and has won over users with commission-free trades and its sleek mobile app. The company took on millions of new customers and attracted more scrutiny this year as many investors accessed Robinhood to speculate on so-called meme stocks such as GameStop Corp. and AMC Entertainment Holdings Inc. Its forthcoming initial public offering is one of the most anticipated of the year.

Robinhood’s growth has continued, with its biggest source of revenue, stemming from customer trading, more than tripling in the first quarter, even as many customers complained about its technology snafus and limited customer service. It enraged clients earlier this year when it restricted trading in some popular stocks that had become so volatile that Robinhood’s clearinghouse told the brokerage to post billions of dollars in additional collateral.

The Financial Industry Regulatory Authority, the front-line inspector of broker-dealers, unveiled the settlement Wednesday. Robinhood neither admitted nor denied the claims.

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Business

Why Did GameStop Stock Price Fall? Its Earnings Report Mattered After All.

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GameStop shares were down 20.2%, at $145.05, in midday trading.


Michael M. Santiago/Getty Images


GameStop

stock was falling fast on Wednesday after the company’s fiscal fourth-quarter results disappointed analysts. There’s also another elephant in the room: The company is considering selling more stock, which could dilute its shares.

GameStop stock (ticker: GME) closed down 33.8%, at $120.34. The S&P 500 index fell 0.6%, while the

Dow Jones Industrial Average

ended flat.

In a filing with the Securities and Exchange Commission, GameStop said it has been evaluating whether or not to increase the size of its previously announced $100 million at-the-market stock-sale program. The company had announced the ATM program in December, with Jefferies acting as the sales agent. The company said it didn’t sell stock as its valuation surged.

GameStop stock received a mix of downgrades, price target cuts, and raises from analysts following the report. “Many on Wall Street have wondered why GameStop has not done an ATM transaction to take advantage of the elevated share price,” Telsey Advisory Group analyst Joseph Feldman wrote. “The answer may be that its balance sheet is in great shape, with cash and cash equivalents of $635MM (incl. restricted cash of $110MM) and debt of $363MM at the end of 2020. The new commentary seems to be a signal that an ATM transaction could be on the way.”

Heading into Tuesday, Feldman had the highest price target listed by FactSet. He lowered his to $30 from $33, calling the event “anti-climactic.” On the flip side, Jefferies analyst Stephanie Wissink raised her target by 1,066% to $175. That’s the new Street-high, in case there was any doubt.

Wissink argued the moves by Chewy co-founder and GameStop board member Ryan Cohen to transform the company into more of a technology firm warrant a completely different valuation method. The company’s earnings release was paired with another trio of hires with e-commerce backgrounds, including

Amazon

alum Jenna Owens as its next chief operating officer.

Wissink wrote that she moved from basing her target on earnings before interest, taxes, depreciation, and amortization, or Ebitda, to a sales multiple that factors in a shift to e-commerce.

She also makes the point that GameStop has the potential to participate in the rise of non-fungible tokens, or NFTs, and the hosting of shoppable content streams.

“As a result, we expect store closures to persist & sales to transfer to dot com,” Wissink wrote. “Total revs may come down, but value per dollar of sales should increase if non-retail streams are realized.”

S&P Global Ratings analysts Mathew Christy and Andy Sookram wrote in a note on Wednesday that they believe the turnaround will involve sizable execution risks and possibly a material increase in its capital investment.”The recent increase and volatility in GameStop’s share price have not affected our fundamental view of its business or the risks the company faces,” they wrote. “However, we note the potential financial flexibility afforded by its improved equity market standing if it chose to raise additional capital to reposition its business or reduce its debt.”

BofA Global Research analyst Curtis Nagle maintained his $10 price objective and Underperform rating. He notes that while GameStop’s adjusted earnings per share of $1.34 beat his estimate for $1.22, he notes that the beat was driven by a large tax credit during the quarter. The company’s Ebitda came in short of his expectations by 66%.

“We continue to be very skeptical on GME’s efforts to address its long standing issue of digital disintermediation and the fact that its core market in new and pre-owned physical console gaming is shrinking at a rapid pace,” Nagle added. “GME also called out leveraging its existing digital assets like its PowerUp rewards program but this has seen declining engagement for years.”

Wedbush analyst Michael Pachter lowered his rating on GameStop to Underperform from Hold, but raised his price target to $29 from $16. While he still thinks GameStop is well-positioned to benefit from the new consoles from

Sony

and

Microsoft,

he says the short squeeze has spiked the stock to “levels that are completely disconnected from the fundamentals of the business.”

“Our downgrade isn’t a reflection of our opinion of company management, which remains very high; rather, it appears that the ‘real’ value of GameStop shares (the price willing buyers are prepared to pay in the open market) vastly exceeds the ‘fundamental’ value we believe investors expecting a financial return can reasonably expect,” he wrote.

Write to Connor Smith at connor.smith@barrons.com

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Business

GameStop stock bounces around after earnings

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GameStop Corp. stock was unsettled in the extended session Tuesday as the videogame retailer at the center of the so-called meme-stock phenomenon said it had laid the groundwork for its “transformation” and reported lower-than-expected adjusted fourth-quarter earnings and sales.

GameStop
GME,
-6.55%
shares initially rose by more than 8% after the report, but pared gains later on, and was last down 3%. The retailer said it earned $80.5 million, or $1.19 a share, in the quarter, compared with earnings of 32 cents a share in year-ago quarter.

Adjusted for one-time items, GameStop earned $90.7 million, or $1.34 a share, compared with $1.27 a share a year ago.

Sales fell to $2.12 billion, compared with $2.19 billion in the fiscal 2019 fourth quarter, reflecting store closures related to the pandemic, the company said.

Analysts polled by FactSet expected the videogame retailer to report adjusted earnings of $1.35 a share on sales of $2.21 billion.

GameStop said same-store sales rose 6.5% in the quarter, with online sales rising 175% for the quarter and 191% for fiscal 2020. The analysts surveyed by FactSet had expected same-store sales to rise 4.7% in the quarter.

The company said it “strengthened” its balance sheet and ended the year with $635 million in cash, “laying the foundation for transformation.”

In a separate press release, GameStop said it had appointed Jenna Owens as chief operating officer, with a start date of Monday, March 29. Owens was a director and distribution manager Amazon.com Inc.
AMZN,
+0.86%.

The company also named Neda Pacifico, who was an executive at Chewy Inc.
CHWY,
-1.39%,
as senior vice president of e-commerce. Pacifico also starts on Monday.

Chewy co-founder Ryan Cohen and two of his allies joined GameStop’s board earlier this year, leading to hopes he’d direct an overhaul.

GameStop’s stock is often cited as one of the meme stocks that have skyrocketed in recent months thanks to frenzied boosts from Reddit comments and social-media posts.

See also: GameStop: what’s the fun in fundamentals, ask Reddit traders on the rocket-emoji launchpad

Shares of GameStop have gained more than 800% in the past three months, compared with gains around 7% for the S&P 500 index
SPX,
-0.76%.

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Business

GameStop Earnings Are Coming. Nobody Knows What to Expect.

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GameStop stock has been on a wild ride for two months.


Justin Sullivan/Getty Images

After two months of wild trading,

GameStop

will report results for its January quarter on Tuesday. What that means for the stock is anyone’s guess.

In a note Thursday, Wedbush analyst Michael Pachter wrote that GameStop is “well-positioned to be a primary beneficiary of the new console launches.” But he thinks the stock is trading at levels that are disconnected from fundamentals. Though Pachter rates the stock at Neutral, he has a $16 price target. GameStop stock was down 0.7% to $200.27 on Friday.

By now, many Americans know why. GameStop stock was widely panned by Wall Street analysts, with the stock falling around the price of a Happy Meal a year ago. It garnered an obscene short interest, meaning hedge funds were lining up to bet on a price decline. But when short sellers get ahead of themselves, positive news can send stocks soaring as they rush to buy shares to close out their bets in the face of unlimited downside.

In the second half of last year, Chewy co-founder
Ryan Cohen
entered the mix. He revealed a stake and later called for major changes. He upped his stake in December and joined the board in January with two associates.

Keying in on the stock’s short interest, and the possibility that GameStop could find a second life as a gaming-focused e-commerce player, retail traders on Reddit’s WallStreetBets forum piled into GameStop stock. Technical quirks of options activity, the aforementioned short interest, and the newfound enthusiasm sent GameStop stock surging in January.

WallStreetBets made it to the front pages of national newspapers, and the bearish hedge funds got torched. It also kicked off a debate about short selling, as well as one about retail traders’ access to financial markets after Robinhood and other brokers temporarily limited buying of the stock due to financial requirements from their clearinghouses.

GameStop stock fell back around $40 but surged again in the past month. Though GameStop announced a hunt for a new chief financial officer, some promising e-commerce-focused hires, and a board committee chaired by Cohen to guide its transformation into a technology company, it hasn’t provided an update on sales or its prospects since its holiday sales release on Jan. 11, which signaled a disappointing December.

For the full fiscal fourth quarter, Pachter, the analyst at Wedbush, expects sales of $2.3 billion, comparable sales up 4.8% year-over-year, and adjusted earnings of $1.38 a share. He notes that GameStop’s holiday sales report indicated same-store sales were down year-over-year in December and lagged behind positive industrywide data from NPD. He notes the company has lost market share in recent periods to competitors amid a shift to internet spending.

BofA Global Research analyst Curtis Nagle wrote in a Friday note that he expects an underwhelming quarter, albeit a profitable one. He wrote that while the recent announcements related to Cohen and new hires are positive, in theory, there haven’t been actual details on cost, timeline, and impacts to earnings of a turnaround plan. He has a $10 price objective with an Underperform rating, noting that the stock’s current valuation and historic multiple would imply earnings before interest, taxes, depreciation, and amortization of $3.5 billion, about four times its peak Ebitda from 2015.

Nagle’s note included an analysis on the impact of $1,400 direct payments on the stock, the idea being that retail investors will use their latest windfall on GameStop stock. His takeaway is that the “stimmies,” as he calls them, will not impact GameStop stock going forward.

Of course, what analysts have said about GameStop stock hasn’t had much of an impact on its recent moves. A positive update on the turnaround plan could thwart the remaining bears in the near term. On the flip side, any commentary on possible stock sales could be negative. Pachter had expected short sellers to abandon their bets, with the stock returning to more fundamental-based levels. That hasn’t happened, he noted.

“Activists control the company’s board, and lead activist Ryan Cohen, founder of Chewy, intends to unveil a new strategy sometime soon,” Pachter added. “When the new strategy is revealed and we are able to evaluate it, we will revisit our estimates and PT.”

Write to Connor Smith at connor.smith@barrons.com

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Business

GameStop Stock Tumbles, but Analyst Still Sees Squeeze Potential

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GameStop shares fell mid-morning Tuesday.


Michael M. Santiago/Getty Images


GameStop

stock dropped again shortly after the market opened on Tuesday. While some short sellers appeared to cover their bearish bets in recent weeks, a short-selling expert says he still sees plenty of squeeze potential.

Shares were down 19% to $178.12 around 10:30 a.m. Such levels are still many multiples higher than the stock’s one-year low of $2.57.

Ihor Dusaniwsky, managing director at short-selling analytics firm S3 Partners, told Barron’s on Monday that his firm estimates about 8.98 million GameStop shares (ticker: GME) were recently sold short, about 16% of shares available for trading.

Dusaniwsky said over the last month, his firm has seen about 7.5 million shorts covered, meaning bearish investors bought shares to cover their bets. The bulk came over the past week, when 4.6 million shares were covered.

“GME shorts are going through a short squeeze, and the stock continues to be on of the top stocks in our short squeeze potential metric, which means the squeeze is probably going to continue if its stock price remains at these levels or higher,” Dusaniwsky added.

The company’s shares rocketed higher last week following a company announcement that Chewy co-founder Ryan Cohen has been chairing a board committee aimed at transforming the retailer into a technology business. Cohen joined the board with two associates in January, kicking off GameStop’s parabolic ascent.

GameStop said it will report fiscal fourth-quarter results on March 23. Analysts expect adjusted earnings of $1.35 a share, up from $1.27 a share in the prior fiscal fourth quarter, according to FactSet. Of course, analysts are far more bearish on GameStop than the retail investors posting on Reddit’s WallStreetBets forum. The highest price target listed by FactSet is $33, while the mean target is $14.64.

While near-term results could cool off the GameStop rally, those excited about the stock are looking far into the future. If the company provides upbeat color on its e-commerce efforts and the impact of the new gaming consoles, it could make a quarterly miss more palatable.

Write to Connor Smith at connor.smith@barrons.com

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Business

GameStop Stock Fell So Much It Had to be Halted. That Didn’t Stop the Selloff.

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GameStop’s stock is up an impressive $1,068% so far this year.


Justin Sullivan/Getty Images


GameStop

stock dropped suddenly Monday morning, prompting a brief halt due to volatility. The stock fell wider than 15% to as low as $223.00, bounced back, and then fell even lower.

Shares of videogame retailer GameStop (ticker: GME) this month have surged back near their late January levels this month. At the close, GameStop stock was down 17% to $220.13.

The company said last week that

Chewy

(CHWY) co-founder
Ryan Cohen
and former Chewy executive
Alan Attal
were joined by Kurt Wolf, managing member and chief investment officer of activist investor Hestia Capital Management, on a new board committee aimed at transforming GameStop into a technology business.

Cohen kicked off GameStop’s run by building a roughly 13% stake in 2020 and urged the company to pivot more toward e-commerce offerings. He joined the company’s board with two associates in January, sending GameStop shares parabolic in the weeks that followed. Analysts pointed to speculative options activity and the closing of some aggressive bearish bets from hedge funds.

Last month, GameStop announced the planned departure of Chief Financial Officer
Jim Bell.
A person familiar with the matter told Barron’s at the time that the company thought it was the right time and was looking for a new executive with a technology background.

GameStop’s latest run began following a Feb. 18 Congressional hearing on trading of its stock and Robinhood. The hearing included an appearance by Keith Gill, the YouTube personality known as RoaringKitty, who has developed a following for his successful long position in GameStop stock dating back to 2019; Gill revealed in a Feb. 19 post that he doubled his GameStop holdings.

While some analysts are upbeat about the company’s turnaround prospects, the highest price target listed by FactSet is $33. That analyst, Telsey Advisory Group’s Joseph Feldman, pointed to valuation concerns, despite his “high fundamental expectations and projected multiyear benefits from the transformation.”

The company said it will report fiscal-fourth-quarter results next week. Like other so-called meme stocks favored by retail traders, such results present a risk to the company’s sky-high run-up. That said, trying to call a near-term top for GameStop has been a fool’s errand, especially for short-sellers facing unlimited downside.

Write to Connor Smith at connor.smith@barrons.com

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Business

GameStop stock surges to highest point since January, market cap tops $17 billion

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Shares of GameStop Corp. shot higher again Tuesday, closing at its highest point since the end of January and pushing its market cap back above $17 billion.

After plunging about 90% from its highs of the meme-stock-buying frenzy in January, GameStop stock
GME,
+26.94%
has skyrocketed more than 108% in the past five trading sessions, including Tuesday’s 27% gain. Shares closed Tuesday’s regular session at $246.90, off from a record close of $347.51 on Jan. 27, and were up another 3% in after-hours trading.

GameStop shares are up more than 1,200% year to date, and more than 5,700% over the past 12 months.

Shares started spiking again Monday after GameStop announced a new  strategy committee to identify ways to accelerate its transformation, which will be led by activist investor and Chewy Inc.
CHWY,
+5.37%
co-founder Ryan Cohen.

Late Tuesday, GameStop said it will report fourth-quarter and fiscal-year earnings after the market closes March 23.

Earlier in the day, the Senate Banking Committee started hearings into financial speculation and the easy-trading practices of Robinhood and other zero-commission firms that, combined with chatter from Reddit forums, helped fuel the historic buying of heavily shorted stocks — such as GameStop and AMC Entertainment Holdings Inc.
AMC,
+13.02%
— earlier this year.

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Business

Tanger Shares Take a Wild Ride

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A worker carries a broom past closed stores at the Tanger Outlets center in Atlantic City, N.J. Shares of Tanger surged on Thursday.


Angus Mordant/Bloomberg


Tanger Factory Outlet Centers

took a wild ride on Thursday, the latest hot potato stock caught in a short squeeze.

The mall operator has a high amount of short interest, currently more than 33% of its shares, according to FactSet. That makes it among the most heavily shorted stocks along with

GameStop

(30.2%),

Rocket Cos.

(39.7%), and

GoodRx Holdings

(27.6%), according to MarketWatch data.

Shares of Tanger (ticker: SKT) jumped 22% Thursday morning to hit a 52-week high before settling down. By midafternoon, they had lost steam completely and were down 5.4%. The stock is up 38% over the last year, compared with a 20% one-year gain in the

S&P 500.

Malls have been among the most downtrodden stocks during the pandemic, forced to temporarily close locations and restrict the number of shoppers while also juggling budget-strapped tenants facing the same challenges. 

Tanger has been a topic on a Reddit forum called WallStreetBets. One post from Wednesday said “SKT is about to reach its highest point since may 2019 and it’s the second most shorted stock after GME. You know what to do!”

“Lets make this explode,” the post says. “Help bring this stock to the spotlight and make it the new GME.”

A spokesman for Tanger wasn’t immediately available on Thursday.

WSB on Reddit is the forum where stock trading enthusiasts share ideas. It’s also a big focus of those investigating the run-up in

GameStop

(GME),

AMC Entertainment Holdings

(AMC), and other stocks a few weeks ago in a trading frenzy described as retail investors going after professional short sellers.

The average rating of the six analysts who publish research on Tanger is Underweight, the equivalent of a Sell. Full-year 2020 revenue fell 10%, to $370 million, according to FactSet.

Write to liz.moyer@barrons.com

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