Retail investors have increasingly focused on Wendy’s after the stock lost about 36% of its value over the past year|Mike Mozart|CC BY 2.0
Wendy’s shares soared on Wednesday as retail investors piled into the fast-food chain, driving one of the stock’s biggest single-day gains in years.
The stock climbed more than 42% during trading before closing up 25.7% at $7.86 per share.
The rally came shortly after Wendy’s announced the appointment of former Potbelly executive Steven Cirulis as chief financial officer and chief strategy officer. However, market watchers believe the sharp surge was driven more by retail traders than by the management change itself.
Social media fuels buying frenzy
Retail investors have increasingly focused on the fast food chain after the stock lost about 36% of its value over the past year. The company became one of the most-discussed stocks on Reddit, with users promoting it as a turnaround opportunity.
Posts encouraging traders to “save Wendy’s” drew significant attention and sparked buying activity.
Short squeeze concerns grow
According to market data firm Vanda, retail investors were on track for their second-largest day of net purchases of Wendy’s stock since 2012. Net buying was more than 50 times higher than the stock’s recent average.
Analysts compared the rally to the meme-stock frenzy that boosted companies like GameStop in 2021. About 23% of Wendy’s tradable shares are currently sold short, increasing the possibility of a sudden share price surge that could force short sellers to buy back stock to cover their positions, pushing prices even higher.
Whether the momentum lasts remains uncertain, but analysts say Wednesday’s surge was clearly powered by unusually strong retail investor demand.