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THE SOUND OF CHAOS

What is Koss and why did its stock climb 81% in two days?

A bald man looks at a screen showing a volatile stock chart on the floor of the New York Stock exchange.
REUTERS/Brendan McDermid/File Photo
Up and up.
  • Karen Ho
By Karen Ho

Global finance and economics reporter

Shares of Koss Corp., a maker of headphones, shot up 16.8% to $21.53 today, after an even bigger spike yesterday, making it the latest company to capture the enthusiastic interest of retail investors.

Koss, GameStop, and AMC Entertainment were among the group dubbed “meme stocks” due to the discussions on a section of the online forum Reddit known as r/WallStreetBets. Due to its business history and negative outlook among investors, Koss was considered a candidate for a short squeeze, a trading phenomenon that happens when a stock or other asset quickly rises in value, punishing the traders and hedge funds who short stocks, betting the opposite would occur. Redditors have pounced on several companies with short interest in an attempt to force a short squeeze.

The share prices of several companies, including Koss and GameStop, have been particularly volatile over the last 30 days, and Koss’s share price reached $64 on Jan. 29. Prior to this rally, Koss shares had not traded above $5 since early 2014.

Riding the Reddit rally

A second “Reddit rally” is being cited for the spikes in trading this week. Shares of Koss climbed to $18.44 yesterday, a 55% increase from its close of $11.90 on Feb. 23. This morning, the stock opened at $30.13, quickly rose to $34.47, and fluctuated throughout the rest of the day before closing at $21.53, up nearly 81% in two trading sessions.

Koss was founded in 1971 by John C. Koss, an inventor who had co-developed a portable record player and headphones capable of producing stereo sound. His son Michael is now CEO, and Koss still designs, manufactures, and sells stereo headphones and accessories. The 51-year old company employs 37 people, is headquartered in Milwaukee, Wisconsin, and now has a market cap of $140 million, according to FactSet.

Millions in investment gains

Even if the share price of Koss falls back down again, the dramatic swings have already benefited several senior people at the company. Four directors and five executives, including three members of the founding Koss family, sold more than $40 million in shares over two days in early February, according to the Wall Street Journal. The gains were significant: more than 1.1 million shares sold at between eight and 15 times the company’s end-of-year share price. Prior to the sale, SEC filings revealed the Koss family owned about 75% of the company, and it was worth only $26 million prior to the retail investment-led boost in value.

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