Newest Meme Stocks Extend Gains With No Sign of Craze Fading

(Bloomberg) -- The newest additions to the meme-stock frenzy surged in premarket trading as retail traders latched on to their latest favorites.

ContextLogic Inc. soared 39% and Clover Health Investments Corp. rose 25% as of 7:50 a.m. in New York, both extending huge gains on Tuesday. Fast-food restaurant chain Wendy’s Inc. edged higher, extending Tuesday’s 26% advance brushing aside a downgrade from Stifel.

There’s no sign of the mania slowing as members of Reddit’s WallStreetBets forum egg on retail traders to take on professional short sellers. The U.S. Securities and Exchange Commission said this week it’s scrutinizing markets for signs of manipulation as meme stocks continue to surge. GameStop Inc, which started the craze in January, reports first-quarter results after Wednesday’s close.

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Gains for ContextLogic, the operator of discount online retailer Wish.com, follow discussion of a potential short squeeze on the WallStreetBets forum. Clover Health, a health insurer backed by venture capitalist Chamath Palihapitiya, is in demand after retail traders realized that short sellers had been swelling their bets against the stock.

Chatter has built on WallStreetBets this week on the potential for short squeezes, following similar successful ploys on meme stocks including Workhorse Group Inc. and Richard Branson’s space exploration company Virgin Galactic Holdings Inc. Workhorse shares are up 10% in premarket trading, with other so-called meme stocks also gaining. Meanwhile, AMC Entertainment Holdings Inc., which has become a poster child for the forum, fell by 6.8%.

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Wendy’s was downgraded to hold from buy at Stifel, which said the stock’s valuation now fully reflects the growth it had been assuming to reach its target price of $25. Analyst Chris O’Cull said in a note that he’s still “constructive toward the company’s fundamental outlook.”

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