WeWork, along with other penny stocks like Amyris and Proterra, has become the latest target of speculative bets from retail traders. Despite their financial struggles and record lows, the shares of these companies have seen a significant increase in trading volume, with gains ranging from 40% to 120%. As of 10:45 a.m. ET on Friday, these three penny stocks were the most actively traded U.S. shares.
According to J.P. Morgan data, retail investors have been particularly active in trading Amyris and WeWork stocks, making them the second and third most traded stocks, respectively. Proterra, on the other hand, ranked twelfth on the list at 10 a.m. ET. This surge in trading activity comes after WeWork issued a warning about the possibility of bankruptcy, a shocking turn of events for a company that was once valued at $47 billion. Additionally, Amyris filed for bankruptcy and announced plans to sell its consumer brands, while Proterra filed for Chapter 11 bankruptcy protection.
Despite the recent gains, Proterra and Amyris had experienced significant losses, with their value dropping by over 90% throughout the week. WeWork, on the other hand, has seen a 17% decline and is on track for its fourth consecutive weekly decline. Lucas Mantle, an analyst at Vanda Research, noted that trading turnover from retail investors tends to increase during periods of larger price swings.
The share movements of these penny stocks resemble the patterns seen in meme stocks like Bed Bath and Beyond and Hertz Global, where retail traders discuss and promote companies on online forums such as Reddit. Some of the recent speculative bets on these penny stocks are based on hopes of a potential merger and acquisition or a turnaround for these struggling businesses. However, investment director Russ Mould warns that the risks are substantial, although the potential rewards are also significant.
Another group of retail traders is looking to take advantage of the volatility, particularly by squeezing bearish investors who have shorted these stocks. Matthew Tuttle, the chief investment officer at Tuttle Capital Management, explains that the allure of these penny stocks lies in the potential for massive profits in a short period, especially when the markets are strong. Last week, retail traders had similarly flocked to shares of Tupperware Brands and Yellow, a trucking firm.
In conclusion, WeWork and other penny stocks have become the focus of speculative bets from retail traders, leading to a surge in trading volume and gains in share prices. Despite their financial struggles, these companies have attracted attention from investors hoping for a turnaround or a potential merger and acquisition. However, the risks associated with these investments are substantial, and the recent surge in trading activity resembles the patterns seen in meme stocks.
