What happened

Shares of mall real estate investment trust (REIT) Tanger Factory Outlet Centers (NYSE:SKT) fell around 10% at one point in morning trading today. It's highly likely that the move is directly related to the gains this retail landlord saw last week. There's an important lesson here.

So what

Last week, a Reddit message board pushing people to attempt short squeezes in numerous stocks, of which Tanger was one, gained international attention and the ire of more than one politician. Caught up in the frenzy, Tanger's stock was higher by around 50% at one point over the past five days. 

A man holding his head with a candlestick chart heading lower behind him.

Image source: Getty Images.

That's a huge advance, and there is some good news here. For example, after suspending the dividend in the early days of the coronavirus pandemic, management brought it back (at a lower level) in January. In addition, traffic at the REIT's largely outdoor properties was strong during the holiday season. But these positives don't offset the fact that Tanger still has a lot of work ahead of it as it looks to re-tenant its properties as retailers are shutting stores and, for some, falling into bankruptcy court. None of this has anything to do with the massive stock gains witnessed over the past five days.

SKT Chart

SKT data by YCharts

The only reason the stock went up so much was because people piled into the short-squeeze frenzy. But, including today's declines, the stock is up only 3% over the past five days. Step back and think about that ... Tanger's stock was up massively and, when the crowd moved on, the price basically fell back down to Earth. Unfortunately, there are likely a lot of investors who bought at the peak who were left holding the bag here -- which is why this type of trading is more like gambling than investing.

Now what

It's probably too soon to suggest that investors can safely look at Tanger based on its long-term fundamentals. There's still a lot of frenzy in the short-squeeze space, and the fact that Tanger got mixed up in it means that erring on the side of caution is likely to be the most prudent move. Still, the company's fundamentals do appear to be improving. So, perhaps keep Tanger on a watch list, even if you don't do anything with it until the gambling element has clearly moved on to other targets.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.