Mad Money

GameStop, Bed Bath & Beyond shares are surging from short busting, Jim Cramer says

Share
Key Points
  • "Like it or not, right now we've got a bull market in short busting, and I bet you'll see more stories like GameStop and Bed Bath. I don't recommend trying to game them." the "Mad Money" host said.
  • Shares of Bed Bath & Beyond spiked 19% Thursday, bested by GameStop's 27% run no the market.
  • "I actually don't like short bashing and stuff like this feels incredibly sketchy to me" but "I can't deny it's working," he said.

In this article

VIDEO3:5003:50
Jim Cramer breaks down the short busting in GameStop, Bed Bath & Beyond

CNBC's Jim Cramer commented Thursday on the big price jumps in stock of two longtime retailers.

Shares of Bed Bath & Beyond surged nearly 19% during the session, a number that was bested by the 27% rally in GameStop, whose shares have posted double-digit gains three times this week alone to levels not seen in about six years.

"Like it or not, right now we've got a bull market in short busting, and I bet you'll see more stories like GameStop and Bed Bath," the "Mad Money" host said. "I don't recommend trying to game them."

GameStop, a video game company, caught interest from buyers on news that online pet food company Chewy co-founder and former CEO Ryan Cohen, an activist investor, would join its board, a sign that the company could enter the digital age after years of trouble. The stock popped more than 12% to open the week Monday before surging again on Wednesday with a 57% gain, the largest single-day gain since the game retailer became a public entity in 2002.

Cramer linked the surge in GameStop's value to a short squeeze, where a stock price grows exponentially buoyed by short-sellers who placed bets that shares would fall. Market participants can place short bets by borrowing stock and selling it with hopes of rebuying it back at lower levels before returning the shares back to a lender, turning a profit on the difference in price change. A stock that goes up instead creates losses for the borrower.

Further aiding in the rise are enthusiastic young investors, leveraging social media sites like Reddit for stock ideas, who are bidding the stock up, he added.

"Right now, if you go to those sites … they're populated mostly by younger readers and participants who are plainly, openly plotting to blow up the shorts in this case by buying GameStop at any price and bidding the stock up, up and up to crush the shorts so they have to cover," Cramer said. "It's incredible to watch. I think they're succeeding beyond their wildest dreams."

Bed Bath and Beyond shares also caught fire with the help of social media investors looking to break the plans of short-sellers, Cramer said. The retailer, which has been undergoing a turnaround plan by closing underperforming stores, has grown 54% in value this year, closing Thursday's session at $27.34.

More than 60% of Bed Bath & Beyond shares are in short interest, while about 140% of GameStop shares have been sold short, according to data compiled by FactSet.

"I actually don't like short bashing and stuff like this feels incredibly sketchy to me," Cramer said. "But, you know what, I can't deny it's working."

In Thursday's session, the three major averages all fell.

VIDEO9:0709:07
Short squeezes are generating major gains in stocks, Jim Cramer says

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer's world? Hit him up!
Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com