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FIRST: I have done my research on the fundamentals extensively. I believe WEN is a good, solid LONG TERM value (1-3 years) as a company consistently producing profits every quarter. This post is not about that.
This is about the idea that short sellers are going to get squeezed in WEN and writing is on the wall. Let me explain.
For the past year, there has been irrational and huge short selling in Wendy's. It has built up to ~32% of the entire shares being shorted. 50 million shares are short out of 190 million total shares possible.
Wendy's is mostly a sleepy stock. It does not actively trade, and has a far smaller market than McDonalds or other big food stocks like Yum Brands.
So, what changed?
A few days ago, a surge of interest came from Wall Street Bets and other platforms. Traders took notice of how undervalued Wendy's was (8 P/E ratio, 8% dividend, and WEN even randomly falling 20% after it **beat** (not missed) earnings estimates by 25%). These traders piled into the stock overnight with this being reported in media.
This is a black swan event.
These short sellers holding 30% of a 'sleepy' stock that wasn't supposed to move much, are now kinda fucked. As WEN goes up in price from increased mania and greed for shares, they're losing money every day. And unfortunately, WEN is producing cash in a mostly stable and predictable sector, so it's not some tech company that presents a real risk to people buying this.
Shares of WEN are already becoming less available. The Borrow Rate to short it went from 4% last week to 20% now, showing brokers believe letting anyone short WEN is a serious risk. In turn, this means shorts will be running to the exits. Would you pay 20% in interest JUST to hold a position, BEFORE profits or losses? Because that's what this means. Also, these shorts will have to pay 8% dividends to shareholders on top of all this interest.
I forgot to mention: With an already small available share count of WEN, institutions are also **holding over 86% of the float** long. That leaves little room. Along with increased buy orders flooding the market, the short sellers can't really hold the fort. For context, WEN had 200 million shares trading on Thursday last week - **more than the entire float of shares*, in a single day. *Yes, as unbelievable as this sounds, 200 million shares traded in a **single day** of a stock that has 190 million of shares total.*
It seems with buying of shares by traders last week, short sellers were also doubling down into the buying and trying to short more shares, increasing their exposure.
At some point, shorts will likely be forced to **Buy the stock and cover** their short positions.
The numbers here just don't make sense for shorts. I'm guessing the shorts are panicking and just hoping everyone calms down so they can quietly unload.
Unfortunately for them the rally is continuing on a multi-day spree, and inviting even more attention and buyers into the stock. I believe a short squeeze is likely.
Note: Do your own due diligence. This is not a trade recommendation, just analysis. Full Disclosure: I am significantly Long WEN.
EDIT: I am being mocked for driving on doordash for employment and being mass downvoted. If any PE/hedge funds or analysts are reading this in the future after WEN goes up, feel free to DM me as I am interested in opportunities. Thank you.