Much like Gamestop, whose shares soared earlier this year as Reddit investors teamed up to squeeze short sellers, Global-Dining's shares had been heavily shorted, which added fuel to the rally.
The restaurant group surged 32.3% on Tuesday, hitting its daily limit, after it filed a lawsuit against the Tokyo Metropolitan government claiming its order to close 26 of its restaurants at 8 p.m. was illegal and not based on scientific evidence.
Its shares continued their rally earlier on Wednesday to hit a three-year high, rising as much as 13.7%, before they reversed course to slide 12.8%.
"Some retail investors liked the company's stance of fighting the authorities and bought the shares," said Tomoichiro Kubota, senior market analyst at Matsui Securities.
The lawsuit won sympathy among those who have seen the social restrictions to curb the pandemic as an excessive intervention in private activities.
"I bought shares today for the first time as I wanted to support Global-Dining. The government's finger-pointing at the company sucks," one investor commented in a popular Yahoo Finance message board.
Japanese media said all but one of the 27 restaurants to which the Tokyo government had issued the order were Global Dining's.
The firm came to fame in 2002 when then-Japanese Prime Minister Junichiro Koizumi and then-U.S. President George W. Bush dined in one of its flagship restaurants, Gonpachi.
In the lawsuit, the firm, whose chains of eateries include La Bohe'me, Zest, and Monsoon Cafe, called for damage compensation of just 104 yen ($0.96), saying the case is not about money.
Global-Dining also raised 13 million yen through crowd-funding to finance the lawsuit, above a target of 10 million yen.
But others were more cynical, saying the company had been struggling financially even before the pandemic.
The firm made net losses in four of the past five years, with an accumulative loss of 2.14 billion yen.
On Twitter, while some praised the firm for standing up against the government, others criticised it as being irresponsible for keeping its restaurants open when most others were compliant.
($1 = 108.61 yen)
(Reporting by Hideyuki Sano, Rocky Swift; Editing by Jan Harvey)
By Hideyuki Sano and Rocky Swift