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Prior to the pandemic, a company declaring severe financial troubles usually scared off investors. However, in the new normal, beleaguered enterprises like home goods manufacturer Tupperware (NYSE:TUP) can sometimes attract immense speculative demand. Despite public warnings of possible bankruptcy, TUP stock continues to defy gravity, bolstered by both meme traders and institutional gamblers.
Back in April 2023, NBC News reported that Tupperware hired advisors to help spark a turnaround. This announcement came after Tupperware notified securities regulators that it may be forced to close. Under the disclosure, management sought to Improve its capital structure to “remediate its doubts regarding its ability to continue as a going concern.”
Earlier this month, however, the food storage firm actually finalized an agreement with its lenders to restructure its debt, according to CNBC. That caused TUP stock to quickly skyrocket on the development. From the closing price of July 20 to TUP stock’s price as of this writing, shares have gained well over 300%.
Unsurprisingly, meme stock mania has helped fuel the fire here. Following a loose formula of betting against intuition, retail investors have attempted to spark new life into TUP stock. Since the start of the year, shares have lost “only” about 27% — a massive improvement from just a few weeks ago.
Short Squeezes and Institutional Players Bolster TUP Stock
For those participating in the speculation, the main goal appears to center on sparking a short squeeze for TUP stock. Since bearish traders must borrow the underlying security to initiate a short position, a rapidly rising share price theoretically threatens unlimited liability. To avoid catastrophic damage, panicked bears must reacquire the underlying security to return to their owners.
Of course, the buying back of borrowed securities creates upward pressure. In addition, the share price increase may convince other short traders to throw in the towel. Should this dynamic materialize, the upswing could be violently profitable for contrarians, as TUP stock can attest.
Right now, data from Fintel indicates that TUP stock’s short interest stands at 27.12% of its float. Further, the off-exchange short volume ratio comes in at 45.5%. Fintel also notes that, at a leading prime brokerage (which is not all-inclusive, to be clear), short share availability sits at only 35,000 shares.
Finally, of significant interest to TUP stock speculators is the fact that even institutional players may be bolstering Tupperware. Fintel’s options flow screener — which filters for large block trades likely initiated by institutions — shows that significant volume and open interest for bullish trades (involving bought calls and sold puts) lit up the radar on Aug. 18.
Why It Matters
Although Tupperware may be an exciting venture, expert Douglas Boneparth — certified financial planner and founder of Bona Fide Wealth — warns against unnecessary overexposure to TUP stock. “People want to chase the momentum or popularity of something, hoping they’re not late to the party. But many times, they are,” said Boneparth, per CNBC.
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On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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