Meme Stocks’ Latest Frenzy Isn’t About a Short Squeeze

Meme stocks have made a comeback, with one big change: This time around, short sellers aren’t a big player in the market.

Individual investors have been gearing up for some weeks to take on hedge funds that are betting against their favorite stocks. In January, their strategy of banding together online to send a handful of shares like GameStop Corp. “to the moon” allowed them to deliver sharp losses to their deep-pocketed opponents and claim a victory over Wall Street pros.

In the latest bout of frenetic trading in unlikely momentum stocks, there appear to be far fewer opportunities for a short squeeze. That is when a stock price begins rising, forcing bearish investors—typically sophisticated market participants like hedge funds—to buy back shares that they had bet would fall, to curb their losses.

The number of shares outstanding that have been sold short, known as short interest, remains subdued compared with the levels seen in January for popular meme stocks like GameStop, Clover Health Investments Corp. and Clean Energy Fuels Corp.

GameStop has remained wildly popular on Reddit’s WallStreetBets online forum since the first wave in January, and its stock has skyrocketed more than 1,100% this year. Short interest accounted for roughly 17% of its shares outstanding as of June 9, compared with 102% at the start of the year, according to data from IHS Markit .