Will APE now trigger an AMC short squeeze soon? The Street says an AMC short squeeze is now more likely to occur due to rising retail demand.
On Wednesday, AMC’s volume skyrocketed to 197 million while APE’s volume followed suit, surging past 134 million.
AMC stock fell more than -23% while APE stock fell nearly -8% intraday despite this massive spike in trading volume.
Another reason the former Jim Cramer-owned media site says an AMC short squeeze is likely is due to the incredibly high cost to borrow.
AMC’s max cost to borrow has reached upwards of 1,006%, per Ortex data.
Similarly, S3 Partners, a financial analytics firm has also reiterated this same thesis.
“Although the threat of significant share dilution is obviously bearish, the upshot on AMC’s share price is still hard to guess.
With borrowing fees closing in on 1000%, any upward trend in AMC’s price could spell disaster for bears.
Given the tremendous short pressure on AMC and the tremendous attention the stock is receiving from retail traders, high volatility and high trading volume are to be expected.
Placing a short bet on AMC may seem perfectly logical given the upcoming APE conversion, but shorts have been burned many times betting against this retail favorite, reports The Street.
Will AMC squeeze after the APE conversion? I’d love to hear your thesis.
Recently two institutions have purchased shares of AMC stock prior to its approved conversion.
Hedge fund CEO Bruce Richards also says he’s ‘super bullish’ on AMC’s new APE conversion.
In the end, whether or not investors manage to trigger a short squeeze, AMC Entertainment will benefit from raising billions in cash.
According to CEO Adam Aron, the only way to eliminate the Wall Street short thesis is by improving the company’s fundamentals.
Also Read: The SEC Approves New Disclosures From Big Hedge Funds
AMC Speaks on Short Sellers Covering Prior to New Conversion
Last week, AMC Entertainment published a statement to shareholders relating to short sellers closing prior to the new APE conversion.
Will short sellers be required to cover their positions before the Reverse Stock Split and Conversion?
According to AMC’s new 8-K filing, AMC expects that the deliveries under stock borrowing arrangements will be adjusted in the regular way to account for the Reverse Stock Split or, in the case of contracts on APEs, the Conversion.
However, AMC states that it “does not determine and is unable to provide interpretive advice on the impact of these events on the contractual terms governing stock borrowing arrangements.”
How will short sellers be affected by the Litigation Settlement Payment?
“AMC does not determine and is unable to provide interpretive advice on the impact of the Litigation Settlement Payment on the contractual terms
governing stock borrowing arrangements.”
AMC’s reverse stock split will go into effect on Thursday, August 24.
The conversion of APE shares into AMC common stock will occur the following day, Friday August 25.
The litigation settlement will then take place on Monday, August 28.
Will there be large failure-to-deliver (“FTDs”) like when the APE was distributed?
AMC Entertainment states that while they cannot predict the trading impact of these corporate events, given the significant transactions that will occur over successive trading days, it is possible there will be large FTDs like when the APE was distributed.
What do you think will occur upon converting? Leave your thoughts below.
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About The Author
Unless the Short Sellers were stupid enough to just sit on their original shorts, they’ve been day trading all the way down to todays disaster and have been laughing their way to the bank! Who needs a squeeze when last years $35 price is todays $2 ???
Share your thoughts below.
I am amazed at how much contradiction there is! Al, you, Jordan (and many others) hold that a RS is detrimental to a short squeeze becuase it decreases the number of short shares by 90% and allows those shorts to further short the stock back down and milk it to the point that they can easily cover their losses by buying back at pennies on the dollar. However, Marcel Kalinovic (Butcher of Wallstreet) claims that a RS doesn’t relieve those shorts form closing their positions and that they still need shares to close those positions and if anything it only worsens their situation becuase those shares become harder to find! The Cost-to-Borrow goes up, and the Days to Cover is increased. Is this accurate? I truly don’t know anymore! I mean both sides (arguments & concerns) have their merits & further questions. But what is real & fake, who knows anymore!
Thats why you buy and hold. The data is real and the freaking second squeeze, which is the current upcoming one, will be more then what we saw before. Kiss MoASS