On Tuesday, the stocks of popular donut company Krispy Kreme (DNUT) surged by an impressive 26.7%, likely due to being swept up in another wave of the meme stock craze.
Stocks that have been heavily sold by investors (shorted) but are struggling and have a large number of sellers, are the ones that individual investors on platforms like Reddit might choose to buy. The aim is to create a situation where all those who had shorted the stock are forced to buy back, a phenomenon known as a “short squeeze”.
Today, Krispy Kreme, among other brands, is experiencing an uptrend, apparently due to its inclusion in the group of popularly traded meme stocks.
No news and a 26% gain is a dangerous combination
Nothing fresh has come up about Krispy Kreme, and the latest updates have been far from positive.
In May, Krispy Kreme’s first-quarter report showed disappointing results, causing them to reduce their dividend and terminate their partnership with McDonald’s due to its lack of profitability. Currently, Krispy Kreme is burdened with a debt of $935 million and, according to generally accepted accounting principles (GAAP), they are operating at a loss this year, largely due to lower-than-expected demand.
Due to recent developments, the number of Krispy Kreme shares with short positions (borrowed with the intention of selling) rose to 14.2% of all available shares, and an even higher 26.4% of its publicly available shares (excluding those held by insiders), as of June 30th.
In a stock with low circulation, a substantial number of shares being sold short could trigger significant price fluctuations if there’s an unanticipated increase in purchases. It seems that day traders focusing on meme stocks chose Krispy Kreme as their target today.
Besides Krispy Kreme, it seems that Kohl’s Corporation (KSS), a retailer that has faced setbacks such as scandals, was also in the crosshairs of meme traders. On that very day, its stock soared by an impressive 38%.
Meme stock trading isn’t for the faint of heart
If you’re attracted by the significant returns in a brief period, remember that trading meme stocks comes with high risks. The rapid profits seen today could vanish just as swiftly tomorrow.
At our investment corporation, we advocate for a long-term approach of investing in top-tier businesses. This method has consistently proven to be more profitable over the long haul, while avoiding the risks, hassles, and tax implications associated with attempting to predict short-term market fluctuations on less reliable stocks.
If you aren’t a professional meme investor or have insights into Krispy Kreme’s potential for real business transformation, it might be wiser to avoid investing in this company at the moment since such a change doesn’t appear imminent as of now.
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2025-07-22 23:31