How Tupperware Became The Newest Meme Stock

Shares of Tupperware Brands Corp. are seeing immense trading and gains on Tuesday, but it's probably not a good idea to buy in on the frenzy.

In an interview with International Business Times, GlobalData Managing Director Neil Saunders said some traders are savvy and capable of making some money on shares of Tupperware (NYSE: TUP) but most investors involved with so-called meme stocks are getting their tips from Reddit and are "just betting" and "playing games."

"It's a bit like betting on the horses, or playing the lottery. There's a chance you could come out smelling of roses. There's a chance you could come out making huge losses," Saunders told IBT. "A lot of people make losses because they don't really know what they're doing ... it's all based on irrationality and unfounded rumors."

GlobalData plc is a data analytics and consulting company based in London.

As of 12 p.m. Eastern Daylight Time, shares of the Orlando, Florida, consumer products company rose to $5.57 a share from Tuesday's opening price of $4.27 a share. At lunchtime, Tuesday's trading volume was about eight and half times higher than Tupperware's average day.

That steep increase followed more than a week of gains that saw the price raise from a 52-week low of 60 cents a share on July 20 to as high as $5.66 a share — an 843% hike in less than two weeks — on Tuesday. Its current market capitalization is about $243.3 million.

In an email, Lemuel Brewster, director of communications for data & analytics at London Stock Exchange Group plc said LSEG's Refinitiv StarMine tool determined there is a high potential for a short squeeze — a scenario where the price of a stock investors are short selling rises so much that the short sellers are forced to buy the stock to limit their losses which in turn cause the price to raise even higher — with Tupperware.

"There is the potential for short sellers to have to sell quickly and spike the price, which looks like it may have already happened," Brewster told IBT.

Refinitiv is a leading provider of financial markets data and infrastructure owned by LSEG. StarMine is quantitative analytics and modeling tool.

A major triggering event for the rally, Saunders said, was an Orlando Business Journal article published on July 27 which postulated Wall Street titan BlackRock Inc. (NYSE: BLK) "stepped in as an investment partner" in an effort to turn around the struggling business. The report was based partially on a July 7 filing with the Securities and Exchange Commission, which indicated BlackRock owns less than 2% of Tupperware's publicly traded shares.

Saunders said that story is "really off base." He doesn't see the filing as a signal BlackRock is coming in to save the business. To the contrary, the New York City based investment manager has actually substantially decreased its holdings in Tupperware.

"(BlackRock has) reduced their shareholdings dramatically over the past few years," Saunders said. "I think this is just a pretty standard filing, and I think BlackRock is actually going in the wrong direction in terms of stockholding."

A month earlier, on June 7, Tupperware filed another report with the SEC confirming it received notice from the New York Stock Exchange that its common stock was under threat of becoming delisted because the average market capitalization fell below $50 million and the average price of its common stock fell below $1 per share for a period of 30 consecutive trading days.

On May 30, in another SEC filing, the company said it was struggling to release its legally required quarterly earnings statements due to "multiple prior period misstatements and material weaknesses in internal control over financial reporting."

"(Tupperware) is currently forecasting non-compliance with certain of its financial covenants in the first quarter of 2023, which will further limit its ability to borrow under the revolving credit facility," the filing said. "The company believes that if it is unable to obtain adequate capital resources or further amend its existing credit facilities to provide additional flexibility and/or access to funding under the revolver or otherwise ... it may be forced to divest assets, restructure or discontinue its operations entirely."

The May 30 filing followed up on March 16 and May 8 announcements of Tupperware's "inability to timely file" its quarterly and annual financial performance disclosures.

When it last reported, on Nov. 2, 2022, it declared a net income of $17.9 million for the first 39 weeks of 2022. That was an improvement over a net loss of $5.2 million during the same period in 2021.

"This rally is opposite of what the fundamentals suggest," Brewster said. "(Tupperware) has issued a 'going concern' clause. Bad news doesn't get a whole lot worse."

StarMine's modeling does indicate there is some potential for Tupperware to be a target for a merger or an acquisition.

Nevertheless, Saunders said there's no good reason for people to believe a "white knight" is coming in to rescue Tupperware. Despite this, he said people tend to play around with stocks when they are approaching bankruptcy, turning the shares into meme stocks.

"There's no rational reason the stock should go up but there are just small groups of people who pump up the price a little bit for their own reasons," Saunders said. "Although the share price has gone up a little bit it's not back to where it was. It's still very much collapsed compared to where it was a year or so ago. It's a little bit of a dead cat bounce."

On Aug. 1, 2022, Tupperware stock closed at $11.24 per share, according to historic NYSE figures.

As a business, Tupperware does not fundamentally present a lot of value to investors. Saunders, also a retail analyst for GlobalData, said the company is saddled with debt, it's stuck in a long period of declining sales for its product, and its direct sales model doesn't work with today's consumer.

Moreover, Tupperware's famous storage devices are far too expensive to compete with the myriad similar, cheaper products sold by competing companies like S.C. Johnson & Son Inc. and by private labels operated by major grocers and retailers.

"People are not going to spend $30, $40 or $50 on containers," Saunders said. "It's just not that competitive."

If investors do buy into Tupperware and decide to hold it, Brewster said the company has negative shareholders equity, or book, value and "in these situations, in case of bankruptcy, shareholders typically get wiped out."