MW As latest meme-stock drama unfolds, there's one thing that is different this time around

By Joseph Adinolfi

Lending costs to short a stock aren't soaring this time around, as investors saw with GameStop

Meme-stock mania might be back, but old heads may have noticed that the moves this time around are lacking a certain explosiveness.

To be sure, stocks like Opendoor Technologies Inc. $(OPEN.UK)$, Kohl's Corp. $(KSS)$, GoPro Inc. $(GPRO)$ and Krispy Kreme Inc. (DNUT) have still tallied huge moves. But the action has lacked a certain squeeze-y quality that was evident when GameStop Corp. (GME) took off in January 2021. During that month, shares of the struggling videogame retailer climbed more than 2,400% at their peak.

As it turns out, there might be a fairly straightforward explanation for this.

Garrett DeSimone, head of quantitative research at OptionMetrics, pointed out in commentary shared with MarketWatch on Thursday that the cost to borrow shares of Kohl's and Rocket Cos. Inc. $(RKT)$, another participant in the latest meme-stock drama, hasn't risen nearly as much as what investors witnessed with GameStop during its initial meme-inspired run.

"Market makers appear well positioned to provide liquidity in the latest rallies of Kohl's and Rocket, as reflected by implied lending rates. After the initial hype, borrowing costs have snapped back to moderate levels around 10% annualized," DeSimone wrote in emailed commentary shared with MarketWatch.

"This stands in stark contrast to GameStop's January 2021 run, when lending costs soared to nearly 80% annualized, making the stock virtually impossible to borrow," he added.

What does that mean, exactly?

"Overall, this suggests that the potential for an extreme short squeeze is likely limited," DeSimone said.

The implied lending rate reflects the cost of shorting, derived from options prices and expressed on an annualized basis. For example, a 10% implied lending rate means that it would cost 10% of the stock's value a year to maintain a short position, DeSimone noted.

Implied lending rates can also indicate the potential strength of a short squeeze, as high borrowing costs make it prohibitively expensive for an investor who has sold a stock short to maintain the position.

One reason this has changed between 2021 and now, according to DeSimone, is that market makers have adjusted their pricing, removing some of the barriers to short selling that investors experienced last time around.

However, this hasn't done much to dissuade investors - particularly those congregating on platforms like Reddit's (RDDT) WallStreetBets - from betting on stocks that have high short interest.

As Bespoke Investment Group pointed out in a report shared with MarketWatch on Thursday, heavily shorted shares have dramatically outperformed the broader market since the S&P 500 SPX hit its 52-week closing low on April 8.

-Joseph Adinolfi

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July 24, 2025 16:34 ET (20:34 GMT)

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