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AMC shares quadruple as retail traders raid hedge fund short targets

TopTradeGroup > Analytics  > AMC shares quadruple as retail traders raid hedge fund short targets

Street performers in Minnie Mouse costumes pass in front of an AMC movie theater at night in the Times Square neighborhood of New York, Oct. 15, 2020.

Shares of embattled movie theater giant AMC Entertainment more than quadrupled at the opening bell on Wednesday amid a flurry of trading activity in some of Wall Street’s most shorted stocks. About ten minutes into the session the stock was halted due to volatility.

Shares of AMC jumped as much as 310% just after stocks opened for trading. The stock quickly gave back some of those gains, and last traded 247% higher before it was halted. During premarket trading shares had been up as much as 360%.

GameStop more than doubled, rising 110%.

Individual investors are creating short squeezes by piling into these names, while hedge funds who are short on the other side rush to cover their losses. They are promoting their activity on the wallstreetbets Reddit board, which has 2.8 million members. AMC appeared to be a growing topic of interest on the board.

The influence of retail investors — most apparent in GameStop — has captivated the Street in recent days, and speaks to a new class of traders who grew up amid the pandemic.

“The spotlight has pivoted from Large Cap Tech/’Retail Favorites’, to a largely ignored corner of heavily shorted smaller cap stocks,” Barclays said Tuesday in a note to clients. “In a span of a month, retail trading has significantly impacted price action and sentiment in these heavily shorted names, cementing the dominance of retail option investors.”

AMC currently has 24% of its float tied up in short interest. Meanwhile GameStop’s short interest stands at 138%, according to FactSet.

AMC jumped 26% on Monday, and 12% on Tuesday, and is now up more than 370% this week. On Monday, the company announced it had secured enough financing to remain open and operational deep into 2021.

“This means that any talk of an imminent bankruptcy for AMC is completely off the table,” said CEO Adam Aron.

For the month, AMC shares are up more than 650%. However, given the stock’s downward decline in recent years a smaller gain, of course, now accounts for a much larger percentage move.

The fervor spread to some other heavily-shorted names in early trading. Bed Bath & Beyond jumped more than 35%. According to data from S3 Partners, the retailer is the second most shorted stock on the market, with 64% of its float sold short. Meanwhile Eastman Kodak, another speculative name, jumped 16%. Short interest in that stock is roughly 20%.

Amid the surge in shares of AMC Entertainment, shares of AMC Networks were also on the move, advancing 15%. AMC Networks’ short interest currently stands at 60%, according to FactSet.

Short interest is the number of shares that are sold short relative to a company’s total available float of stock.

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