Somewhere between a clearance sale and financial arson, Kohl’s just turned into GameStop 2.0. The stock exploded nearly 90% at Tuesday’s open before settling into a still-laughable 30.79% gain (at the time of this writing)... not because the business improved, but because Reddit said so.

(Source: Giphy) 

Again, let’s be very clear here, this absolute mind melting frenzy didn’t occur because of a turnaround or a surprise earnings beat. This was market degeneracy all around. For instance, at the core of the chaos, 53 million shorted shares… nearly 49% of Kohl's entire float… were caught pants-down when a swarm of Reddit day traders said “lol what if we made this our personality for a week.” They did. And the shorts got nuked. By 10 AM, KSS had tripped multiple volatility halts and become the most trafficked ticker on Stocktwits. Analysts scrambled to revise notes they hadn’t updated since 2018. Goldman’s $7 price target suddenly looked like a joke. 

(Source: TipRanks) 

With that said, this wasn’t just Kohl's party, either. Children’s Place, a.k.a. The hand-me-down store for kids and another heavily shorted retail relic, jumped 25% in sympathy… which makes sense because financial logic left the building hours ago. Especially considering Kohl’s has been circling the retail drain for years. For example, missed earnings, slipping comps, a CEO revolving door, and stores that feel like the inside of a 2007 JCPenney simulator have plagued the company into irrelevance. Additionally, Kohl’s is paying out more in dividends than they make in earnings… a.k.a. a classic value trap in a mall-wrapped tombstone. Naturally, Wall Street’s answer has been to short it into oblivion. Reddit’s answer? Let’s ruin some fund manager’s day. 

And yet, the mechanics were a classic example of what we look for when it comes to the perfect squeeze: high short interest, low float, trash fundamentals, meme potential. Sprinkle in a bit of Main Street rage and boom… a full-blown horned up explosion. The short interest days to cover was 6.7, meaning if shorts wanted out… they couldn’t (not without kicking the stock even higher). Talk about locking the exits, then setting off the fireworks inside. 

(Source: Giphy) 

Now for the big question: Is this sustainable? Absolutely not. But sustainability isn’t the point. It’s never the point. Reality doesn’t exist when you’re the new “ticker of the week” for Wall Street Bets. Whereas, the worse the business, the better the squeeze fuel. And for a brief, glorious morning, that actually worked. 

In the end, this isn’t investing by any means. It’s performance art with real money. And for hedge funds who thought they learned their lesson in 2021, welcome to the rerun. Different ticker. Same fire. Meaning, keep your eyes on Kohl’s and for the love of everything Holy, be smart. Do your due diligence and place your bets accordingly. Until next time, friends… 

At the time of this writing, Stocks.News does not hold positions in companies mentioned in the article.