February 8, 2021 BARRON’S 13
L
ong beforeGameStop,
there was Piggly Wiggly.
In 1923, the supermarket
company, which still does
business in the South and
Midwest, was at the center
of a short squeeze and mar-
ket morality play that echoes the re-
cent frenzy around GameStop (ticker:
GME).
As with GameStop and other meme
stocks likeAMC Entertainment
(AMC), Piggly Wiggly was sold short
by several large Wall Street invest-
ment firms. This aroused an unex-
pected popular backlash, stirred by a
resentment of “city slickers” getting
rich off the “yaps,” or little guys. So,
there was a sense of triumph when
investors fought back and put the
squeeze on the shorts.
“New York speculators,” crowed
one newspaper, “made to pay through
the nose.”
The Piggly Wiggly shorts got
crushed, much as Melvin Capital lost
53% in January chiefly on its GameStop
downside bets, but that wasn’t the
whole story. While there were big
winners, there were also big losers—
none bigger than Piggly Wigglyfounder
and president, Clarence Saunders.
“After working a sensational
squeeze on Piggly Wiggly,”Barron’s
reported at the time, “the Memphis
Fall of a Memphis Maverick.
To counter the shorts, Saunders
borrowed $10 million on margin from
a number of investors and hatched a
plan to buy upall outstandingPiggly
Wiggly shares, driving the price up.
The stock reached $124 on March 20,
1923—when it was suspended by the
New York Stock Exchange.
There was a “wild scramble by the
shorts to cover,”Barron’swrote, yet
there was less of that than many had
expected. The stock showed a “declin-
ing tendency” after the shorts had
covered, and “the over-the-counter
market for the stock gradually disap-
peared.” In the end, Saunders and his
associates were left with “practically
the entire issue of 200,000 shares on
their hands—a large part of which had
been accumulated at high prices” with
no market to unload them.
ToBarron’s, Saunders had simply
suffered “the customary fate of the
Main Streeter who attempts to beat
Wall Street.” Three years earlier,
a short squeeze engineered by the
owner of Stutz Motor ended in bank-
ruptcy for Stutz and his company.
Yet there were also winners in the
Piggly squeeze, Freeman writes, in-
cluding a retired grocer from Provi-
dence, R.I., who bought a thousand
shares at $38 before the squeeze, ex-
pecting to use them for dividend in-
come. Instead, he sold them for $96 to
$124 apiece, making a profit of almost
$80,000 (around $1.2 million today).
Saunders went back to Tennessee,
where “Memphis folk still have confi-
dence” in him, asBarron’sreported.
But his subsequent ventures met with
middling success. He died in 1953, his
hopes of becoming the Henry Ford of
supermarkets undone by an ill-fated
decision to take on Wall Street.B
Piggly Wiggly
suffered “the
customary
fate of the
Main Streeter
who attempts
to beat Wall
Street.”
Barron’s
grocer found that his ‘victory’ had cost
him about $3 million and control of his
company.” It also tarnished his legacy.
Born in 1881, Saunders worked his
way out of poverty to become a retail
pioneer, turningPiggly Wiggly (the
origins of the name remain obscure)
into the nation’s first “Self-Serving
Store” in 1916.
That is, instead of customers giving
their shopping lists to clerks to fill—
the practice of the day—they walked
the aisles and chose their own goods.
This simple concept caught on; by
1921, there weremore than 600Piggly
Wiggly stores across the U.S. Saun-
ders’ self-serve model remains the
norm for supermarkets, from Kroger
to Walmart.
To fuel more growth, Saunders in
November 1922announced plans to
sell 100,000 new shares. That, com-
bined with unrelated news of a Piggly
Wigglyfranchisee filing for bank-
ruptcy, “caused heavy selling,” wrote
Barron’s, knocking shares down to
$30 from $45. Then, Merrill Lynch
and other Wall Street firms launched
a “bear raid,” shortingPiggly Wiggly
stock in a bet that it would fall further.
Saunders cast the issue as good
versus evil, asking investors, “Shall
good business flee? Shall it tremble
with fear? Shall it be the loot of
the speculator?” as quoted in Mike
Freeman’sClarence Saunders and the
Founding of Piggly Wiggly: The Rise &
Piggly Wiggly’s GameStop
Moment—in 1923
By KENNETH G. PRINGLE Clarence Saunders’
Piggly Wiggly pio-
neered self-serve,
in which customers
walked the aisles
and chose their own
goods. The practice
is the norm for mod-
ern supermarkets.
/y g
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