Wendy’s surges over 40% after viral Reddit post ignites meme-stock frenzy

Wendy’s stock exploded Wednesday after a viral Reddit post sparked a meme stock frenzy that sent shares of the struggling fast-food chain soaring as much as 42% in a matter of hours.

The rally, which briefly triggered a volatility halt, appeared to have little to do with the company’s fundamentals and everything to do with the online trading crowd searching for its next target.

Traders zeroed in on Wendy’s after a post on Reddit’s WallStreetBets forum urged users to “save Wendy’s before it’s too late.” The post was removed, but not before helping ignite a rush into the stock.

By midday, some of the gains had faded, though shares remained sharply higher and were up roughly 24% as of the afternoon.

The sudden surge marked Wendy’s biggest jump since March 2020, when markets rebounded from the pandemic-driven crash.

The burger chain — known for menu staples like the Frosty, Dave’s Triple burger and the Biggie Deal — has endured a painful stretch on Wall Street.

Its shares fell more than 70% since mid-2023, making it the type of beaten-down stock that often attracts speculative traders looking for a dramatic rebound.

The company also had another characteristic that meme-stock investors frequently seek out: a large number of investors betting against it.

Short interest in Wendy’s shares stood at roughly 24% of the stock’s public float, according to data cited by Bloomberg News.

That means a sizable group of traders had wagered that the stock would continue falling.

When heavily shorted stocks suddenly surge, those bearish investors can be forced to buy shares to limit losses, creating additional demand and driving prices even higher in a phenomenon known as a short squeeze.

Scott Martin, a partner at Kingsview Wealth Management, told The Post that the Wendy’s rally “has much more to do with trading activity than it does with the underlying business.”

“Investors are focusing on momentum and short interest right now, not necessarily restaurant sales or earnings expectations,” he said.

Martin added that the meme stock dynamic was familiar.

“We’ve seen this movie before,” he said.

“When a stock has a recognizable brand name and a large short position, it doesn’t take much to attract attention from retail traders looking for the next big move.”

Martin cautioned that the longer-term question is whether Wendy’s business has actually changed.

“There’s a big difference between a stock moving because of improving fundamentals and a stock moving because traders are piling into the same theme at the same time,” Martin said.

The rally came despite a weak operating backdrop.

Wendy’s reported first-quarter US same-restaurant sales declined 7.8%, while global same-restaurant sales fell 6.8% as the chain struggled with soft traffic and weaker consumer spending.

The Wendy’s surge evoked memories of 2021, when videogame retailer GameStop became the face of the meme-stock movement.

At the time, retail investors coordinated online and piled into the company’s stock, triggering a historic short squeeze that inflicted billions of dollars in losses on professional investors who had bet against the company.

Last year, Krispy Kreme and Opendoor Technologies both experienced similar bursts of speculative buying as retail traders hunted for heavily shorted stocks with recognizable brands.

The Post has sought comment from Wendy’s.