Written by Grant Medford
I stumbled across AMC back in late January of 2021. I heard of the large gains that people were making on GameStop, and had heard that AMC was next. Since I’m a human being who needs more money in my life, I took some savings and extra cash and bought a handful of shares.
Little did I know that I would begin a journey down a rabbit hole that, to this day, amazes, frustrates and excites me.
I’m no professional investor. I don’t have “Financial Advisor” on my LinkedIn profile. I’m actually pretty terrible with money. But, I love making money and I love going to the movies.
So, throwing a few dollars toward something I love in hopes that it makes more, seems like a sure thing. But, I’ve discovered in these past few months of buying and HODLing, that sometimes sure things take patience and knowledge.
So, what have I learned in the past few months? Maybe you’re a first-timer like me. Perhaps a buddy convinced you to buy a few stocks because he dangled an #AMC500K carrot in front of you. But, you’re still confused. I get it. It’s confusing.
Let me highlight the bright points of the past few months and catch you up to speed.
It starts with SHORT SELLING.
Short selling is the practice of borrowing a stock from someone and selling it at market value. You then drive the price down through media attacks on the company, or FUD – Fear, Uncertainty and Doubt. Once the price is sufficiently driven down (or the company is bankrupt), you buy the share from the market at the reduced price and return the share you borrowed.
Your profit is the difference between what you sold it at and the price you paid to return the borrowed share. In the case of a bankrupt company, the shares are voided, you don’t have to return anything, and you keep the straight profit.
AMC was the target of these institutions. These institutional investors are called Hedge Funds.
It continues with MARKET MANIPULATION.
What tactics do institutions use to drive the price down? There are many. They can spread bad news about the company through the media outlets. They trade borrowed shares back and forth between other institutions to delay paying back the shares in a timely fashion (borrowing shares does cost them – they do pay interest on those loans, however.)
They can create synthetic shares – fake shares that are introduced into the market on the promise that real ones will be found at a later date eventually.
These fake shares can then flood the market to increase supply and drive the price down. Supply and demand are the name of the game. The more shares there are to buy, the less the price is. The fewer shares there are, the higher the price goes. This is how the market works.
Another method of manipulation that has been recently discovered is trading through dark pools. This ominous-sounding system was actually created, innocently enough, so that large firms could buy and sell massive amounts of shares without dramatically affecting the market and thus, dramatically affecting the price of the stock.
Hedge Funds have been using these dark pool trading systems nefariously to drive the price down. They buy the stocks in the dark pool (unaffecting the market) and then sell the shares in the regular market, driving the price down through increasing supply of the stock.
Enter the APES.
Apes are the term used to describe the retail investors who are trying to stop hedge funds from shorting AMC stocks and destroying the company.
For a description of the various terms used by the Ape community, check out Christie Smythe’s article, The r/WallStreetBets Glossary. These retail investors are attempting to “squeeze” the price of AMC stock and save the company from bankruptcy.
What is a “Squeeze”?
Remember earlier we spoke of how the hedge funds are borrowing shares, selling them, then purchasing them at a lower price through manipulation? Well, the strategy of the APE Nation is to buy all available shares of the company and hold on to them.
When the hedge funds do have to finally return the shares they borrowed, the only shares available would be the ones owned by retail investors. If the Apes are unwilling to sell their shares back into the market, it dries of the supply of shares and forces the price of the stock higher and higher – thus “squeezing” the price of the share.
Because no stock has ever been shorted as much as AMC in the history of the market, no one really knows how many shares are actually in the market or how high the price will go. The longer the retail investors hold onto their stocks, the more the price increases, causing what is known as MOASS – the Mother Of All Short Squeezes.
No one knows when the squeeze will happen. The Ape community has an incredible network of people who are doing great DD (Due Diligence) or research in order to watch dark pool statistics, chart movements, shorting statistics and media influence.
They are also watching the Securities and Exchange Commission (or SEC), the government watchdog for criminal and unfair market practices. The SEC is regularly investigating the markets for abuses and are producing filings that provide regulation to these unfair and criminal market activities. The more we learn from each other and share information, the faster the process speeds up.
What’s next with AMC?
No one can tell you what to do with your money. But, the fact that you’ve read this far tells me you want to learn. I, too, was in your shoes back in January of 2021. If I was going to invest my hard-earned money in a system I knew very little about, I knew I had to do some research.
Hopefully, this article has kicked-started that process for you. The more you research, ask questions, and listen to others who are on the same journey as you, the better off you’ll be to make smart decisions about your ownership in AMC stocks.
There are millions of people just like you. You’ve joined a movement that pays some great dividends and could leave lasting change in the American stock market. Be a learner, be an investor. Be a change-agent.
Written by Grant Medford
You can follow Grant on Twitter @Grant50909896