There was once a theory that meme-stock investing was a battle of good versus evil: retail investors driving up shares that unscrupulous short-selling hedge funds had tried to drive down read more . The 60% surge in the stock price of private prison operator GEO Group (GEO.N) on Wednesday makes the morality tale hard to sustain .
GEO and rival CoreCivic (CXW.N) have been walloped by President Joe Biden’s decision not to renew many of their federal contracts. Both were diversifying into other areas like halfway houses, but the transition is slow, and banks are reluctant to lend. GEO halted its dividend in April read more . One-third of its shares are out on loan, according to Refinitiv, suggesting many investors are betting against any turnaround. With $2 billion of debt due by 2024 and under $400 million of annual EBITDA, their pessimism is understandable.
If the rally continues, perhaps GEO could issue stock at an inflated value, as fellow meme AMC Entertainment (AMC.N) did, pay down debt, and invest in something less entwined with human misery. That, though, is probably as far-fetched as the social-media fairy tale that created meme stocks in the first place. (By John Foley)