Wendy’s stock jumped more than 20% in premarket trading Wednesday after the fast-food chain named Steve Cirulis as chief financial officer and chief strategy officer, a move that touched off a wave of retail investor enthusiasm centered on the chain’s potential as a short-squeeze target.
Wendy’s stock was more traded in premarket hours than chip makers Micron and Intel, with more than 14 million shares changing hands before the opening bell, according to Barron’s. A sustained close at those levels would mark the stock’s best daily performance in over five years.
The executive appointment served as a catalyst, but retail traders appeared to be the primary force behind the magnitude of the move. Data from Swaggy Stocks, as cited by CNBC, showed Wendy’s had climbed to second place among all stocks by mention volume on Reddit in the preceding day. On Stocktwits the ticker hit the top of the trending charts, and WallStreetBets on Reddit was flooded with discussion of the chain.
Traders identified Wendy’s as a short-squeeze candidate given the sizable bearish position in the stock. S3 Partners pegged bearish bets against the company at about 23% of available shares. The outlet put the figure at just under 30%, while Yahoo Finance, citing Koyfin data, placed short interest at a record 26.4%. A short squeeze occurs because bearish traders who face mounting losses must buy back shares to exit, and that wave of forced purchasing adds upward momentum to an already rising price.
Cirulis, who most recently served as CFO and chief strategy officer at Potbelly Sandwich Works, joins a leadership team assembled around a turnaround effort led by President and CEO Bob Wright. The two previously worked together at Potbelly, where the company said their tenure produced a more than 500% increase in share price along with double-digit growth in average unit volumes. Cirulis succeeds Ken Cook, who will remain in an advisory role through July.
“Driving solid financial discipline, topline growth and enhanced franchisee profitability are essential to our future success,” Wright said in a statement. “I am confident that Steve will play a critical role as we execute the turnaround of Wendy’s.”
The stock’s rise follows a prolonged slump. Heading into Wednesday, shares had shed close to 40% of their value over the preceding twelve months and on Tuesday hit their lowest point in two decades, Yahoo Finance reported, as restaurant traffic suffered from consumer belt-tightening. Domestic comparable-store sales deteriorated sharply in the first quarter, plunging 7.8% after a comparatively modest 2.8% decline in the year-earlier period. Wendy’s named Wright as its permanent CEO in May, ending a leadership search that stretched nearly a year following the departure of his predecessor.
