I hear it among the CEOs of small-caps some of the time now. I suspect I will hear it many more times in the coming months.
"How do we become a meme stock?"
First, let me say, in some ways I am the worst person to ask. As the only individual in the media fierce - or stupid - to take this mob on, I am no advisor to those who are seeking this throng's attention. You will be in my twitter feed in a nano-second and it won't be positive.
But I get this cynical gaming of the most nihilistic group of people I have ever seen in 40 years of investing. The desire to be a "meme" stock means the desire to have your stock bid up by Reddit followers with the hope that you can dump either your shares to make a score or the companies' shares to clean up the balance sheet.
The meme-seekers want what happened to the stock of AMC (AMC) : a company that might have gone bankrupt were it not for the short sellers whom Wall Street bettors hate and seek to destroy. Or they want what happened to GameStop (GME) where a savior emerged - Ryan Cohen - as a sort of Mel Gibson Braveheart character, who created a movement to smash the shorts.
Both cases have been wildly successful.
So, naturally, CEOs want to emulate the success of either or both.
However, in the interests of companies seeking the attention of the WallStreetBets crowd with the hopes that they can get the meme crowd to bid their stocks up, there's something that must happen first before you attract their attention: you need a gigantic short position in your stock.
Now no company I know ever aspires to have a large short position against it. You can't just go out there and hire shorts to get squeezed up by the WallStreetBets people as tempting as that may be. However, if you could that would be the best way to get the WSB crowd to buy your stock.
Nor can you hire someone to make a short report that scalds you. As diabolically brilliant as it may be, there is no Hindenburg for hire. Nate Anderson, the analyst behind Hindenburg, is actually an honest guy trying to profit from rooting out questionable managements and he's done a very good job of doing so. I don't know of any really venal outfit that will comply with the process of starting up a short campaign.
However, I do know this. The shorts are on the run more than I have ever seen before. They are a bunch of bambis, endangered forest slaughter. I think any company with a stock that has more than a 10% short interest will be ready to rock and roll with a simple reach out via twitter. All management has to do is note something positive that is about to occur and a mention of the size of the short and that gets the WallStreetBets people going. They aren't Einsteins, or Buffetts or Mungers, although the latter shares many characteristics of meanness and contempt.
Now, why am I mentioning how to get things going? Because I would love nothing more than an honest company that needs money to get the WSB people to raise it for them. The WSBers are just a dream come true for a company that needs money. If they sense there are shorts to be trashed they will take a stock to infinity to do so. Of course, as we saw with Corsair Gaming, the execs are beginning to ready their insider forms to be able to drill the WallStreetBets bids at much higher prices than thought possible.
Unfortunately, I have found that most companies with a high short position in their stock tend to be deserving of such. They have bad balance sheets, negative prospects and are inherently undervalued. I think most short sellers, when not part of a stupid gang tackle effort a la GameStop or, say Bed Bath & Beyond (BBBY) , are smarter than the longs, or were smarter before the WSBers emerged as the most important force in capitalism at this moment.
So my bottom line: you can't aspire to be a meme stock. That means aspiring to be shorted. And the shorts just aren't that stupid to take that bait. Nevertheless, sadly, I think if I were short any stock with a more than 10% short position I think it is time to cover and cover right now because you have a target on your back and it is way too big to beat.
