Since July 1, shares of Bed Bath & Beyond Inc. (NASDAQ: BBBY) had soared by 390%, as of Wednesday’s closing bell. The stock traded down more than 24% just before noon on Thursday.

By now, everyone has figured out that Bed Bath & Beyond’s shareholders have benefited from an enormous influx of retail buyers who are effectively executing a short squeeze, forcing short sellers to lighten or liquidate their short positions or continue to lose money. Short sellers had absorbed losses of $179 million in early trading Wednesday, according to Ihor Dusaniwsky and Matthew Unterman of S3 Partners. In the month of August alone, shorts had posted $688 million in mark-to-market losses and were down $586 million for the year to date.

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Dusaniwsky and Unterman also noted that even as the share price soared, the number of shorted shares also increased. That doesn’t mean that there isn’t a short squeeze on Bed Bath & Beyond stock:

[I]t means that there are short sellers coming in to replace those that are exiting their trades. While existing short sellers were squeezed out when BBBY hit $10, $15 & $20 per share there were other traders who saw $10, $15 & $20 per share as attractive short-side entry points.

The stock touched an intra-day high of $30.00 on Wednesday before closing at just over $23.00. Shares were trading at around $17.30 in the late morning Thursday. Does this indicate that Sein’s Law has finally kicked in? That is, “If something cannot go on forever, it will stop.”

More than 98% of the stock available for short sellers to borrow already has been taken down, according to Dusaniwsky and Unterman. Nonetheless, they expect the short squeeze to continue as more short sellers ignore the high stock prices, instead “looking for a whipsaw of stock prices down.” Thursday could be the day.

Dusaniwsky and Unterman also note that the short squeezes on AMC Entertainment Holdings Inc. (NYSE: AMC) and GameStop Corp. (NYSE: GME) are continuing, perhaps defying Stein’s Law. Based on the share price at the beginning of 2021, AMC stock remains up about 555%, GameStop shares are up about 285%, and Bed Bath & Beyond stock is down 30%, including the recent runup.

AMC short sellers have put up mark-to-market gains of $268 million for the year to date. Dusaniwsky and Unterman comment:

The AMC short squeeze will continue as long as stock prices stay at these levels, short sellers who were up over $1.1 billion in year-to-date mark-to-market profits, up +67% for the year at that time, are trimming positions in order to realize what is left of their early profits.

GameStop short sellers have been less fortunate. For the year to date, they have absorbed mark-to-market losses of $718 million:

GME continues to be a squeeze stock as short-side losses continue to climb. Short sellers with less conviction or with less stamina continue to exit or trim their positions. But if stock prices reverse you can be sure short sellers will re-spawn and jump back into the name.

Dusaniwsky and Unterman also looked at a meme stock newcomer, Coinbase Global Inc. (NASDAQ: COIN). Short sellers are still sporting gains of $710 million for the year to date on Coinbase stock, including mark-to-market losses of $787 so far in August. Short sellers piled in on the stock in May and shorts have headed for the exits just as quickly this month.

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The researchers make one final observation on meme stocks:

Meme stocks, and the retail long shareholders who have created them, continue to agitate and confound the market, moving stock prices based on momentum and not necessarily on fundamentals. Meme stocks have not only been profitable for retail long shareholders but also for momentum and quant hedge funds … But while the retail side remains mostly on the long side, the hedge funds actively participate on both the way up and way down. Retail investors might hate the hedge funds, but … they are sometimes standing side by side moving the market higher together. Unfortunately, if and when stock prices reverse downward, the retail side stands alone with their “diamond hands” as the hedge funds cross over to the short side of the market.

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