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AMC Surges Past January High As Reddit Traders Fuel Another Massive Short Squeeze

Topline

After a week of stunning gains, shares of AMC skyrocketed again Thursday, pushing the heavily shorted stock past its peak at the height of the meme-stock mania in late January as individual traders have once again banded together through Reddit and other social media platforms to squeeze institutional investors out of their bearish bets against the stock.

Key Facts

AMC shares popped as much as 50% Thursday afternoon to $29.44, eclipsing a closing high of $19.90 on January 27—the day meme stocks peaked earlier this year, before crashing as much as 90%.

“The retail trader is at it again,” Oanda Analyst Edward Moya said in a Thursday afternoon email about AMC’s meteoric resurgence, noting that at-home investors are still “adamantly committed” to take on short sellers.

AMC short interest climbed to a record high 95 million shares in May as trading volume and prices also surged, likely forcing a short squeeze, which typically happens when institutional investors betting on a price decline cut their losses by buying back shares at higher prices.

Analysts are also pinning Thursday’s gains to a swath of AMC options set to expire Friday, effectively forcing investors to either double-down on risky bets or unwind their positions–the perfect recipe for volatility and something that’s fueled past meme-stock bumps.

A slew of Twitter trends Thursday reflected the surging interest among social media traders, with #AMC500k, #apestogetherstrong (a reference to bullish Reddit traders who call themselves apes) and #AMCstrong all dominating the platform’s most buzzed-about topics.

In another sign of the high-risk market’s potential consequences, short-sellers betting against GameStop and AMC lost more than $1 billion between Tuesday and Wednesday, according to data from financial analytics platform Ortex.

Surprising Fact

Despite a massive correction in late January, meme stocks AMC and GameStop have held onto much of their staggering gains since their rapid rise sparked broader market volatility that led to the Dow Jones Industrial Average’s worst performance in three months. This year, AMC and GameStop are up more than 1,300% this year, though the latter was roughly flat Thursday and is still about 30% below its January closing high.

Tangent

AMC shares hold an average one-year price target of about $5.11 on Wall Street, implying that analysts believe the stock could likely plunge more than 80%. “Amid frenzied retail buying, AMC bucked the traditional selling pressure as its largest shareholder mostly sold off its stake,” CFRA Research analyst Tuna Amobi said in a Wednesday note to clients despite raising his price target to $15.50 (roughly half of current prices). Amboi says he’s still “wary” of the stock given its massive debt load (including more than $5 billion raised during the pandemic) and the bevvy of Hollywood studios eschewing theaters for high-profile releases in favor of streaming platforms. 

Big Number

$4.6 billion. That’s how much AMC lost last year as a result of widespread theater closures during the pandemic.

FURTHER READING

AMC And GameStop Skyrocket As Reddit Traders Rally Around Meme Stocks Anew (Forbes)

Meme Stocks And Crypto Surge Again As Experts Warn Of ‘Dangerous’ Market Conditions (Forbes)

Here’s Why GameStop Excitement Is Surging Again On Reddit (Forbes)

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