AMC’s shares on loan continue to hit an all-time high.
Shareholders are patiently wait for the built-up pressure to send AMC’s share price to a new all-time high this year.
Last year the stock reached an incredible $72 per share, squeezing only a very small percentage of short sellers.
Today, there are more short sellers playing a risky bet than there were last year.
The data in this article is the same data that showed us AMC would surge when it did to $20 in January, and $72 in June.
Let’s discuss it.
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History is about to repeat itself
What caused AMC Entertainment stock to surge to $20 per share on January of last year?
Better yet, what caused it to skyrocket to $72 per share last June?
It’s not so much a matter of what, but why?
Why did AMC have these runups last year?
The answer is because of AMC’s short interest.
Like GameStop, retail investors noticed AMC had a high short interest.
A high short interest meant retail had the chance to squeeze shorts from their positions by driving the stock price up through big buying pressure.
Shorts make their profit as stocks go down, so if the price of a stock was driven up, their profits would eventually turn into losses.
So, some short sellers began to close positions and leave the risky bet.
But many stayed behind, holding, waiting for AMC and GameStop to drop to pandemic levels and make their money back.
The market has experienced nothing buy bear rallies all year.
And I think short sellers are going to take advantage of the market by finally closing their positions.
But let’s go over the data first.
Why is AMC going to go up again?
AMC stock is going to go up again because the shares on loan are at an all-time high.
These shares on loan eventually have to be returned to the lender by buying back the stock in the lit market (NYSE).
The massive buying pressure is going to create a high demand for the stock.
As the demand for the security goes up, so does the cost to buy it (the value of the security).
When AMC surged to $72 per share in June, it had roughly just over 100 million shares on loan and a short interest of 24% before falling to 20%, then 14%.
Today, AMC’s shares on loan have hit 181.85 million with a high short interest of 23.48%.
Short sellers owe their lenders more now than they did when AMC shot up to $72 last June.
No matter what the catalyst is, AMC is inevitably going to surge again.
And you can bet it’s going to be a lot higher than its previous all-time high of $72 per share.
Here’s what’s happening in June this year
Something big is happening in June.
Like all news, we should take this with a grain of salt – but it’s exciting, nonetheless.
Executive order 14032 was responsible for prohibiting the use of Chinese securities as collateral last year during the times AMC ran up to $20 per share and $72 per share.
This propped up margin calls because of the large exposure our financial institutions have to Chinese securities.
When these securities were no longer accepted as collateral on January 27th, 2021, AMC stock surged.
The order was shortly amended (moved) to May 27th, 2021, where AMC stock had its second surge, reaching an all-time high of $72 per share only a few days after.
Executive order 14032 is to go into effect on June 2nd.
So, it’s very possible we could see something big happen the first week of June.
The difference this time is that over 70 Chinese securities are being affected, compared to last year’s 30.
A bigger collateral haircut means more liquidity will be needed to keep up with margin requirements.
This is why we’re seeing this massive selloff in the market today.
Institutions need liquidity to keep up with margin requirements.
And they’re in a tough situation because as share prices keep dropping, DTCC B16845-22 keeps raising margins.
Collateral haircut, no liquidity, margin calls
It’s a recipe for disaster.
What’s going to end up happening is financial institutions are eventually going to have to close their short positions in heavily shorted stock.
This could be their last resort for liquidity, if profitable.
Hedge funds are in a whole other world of pain right now.
Ken Griffin said retail investors wiped out the pension plans of teachers after Gabe Plotkin announced Melvin Capital was shutting down.
I wonder what he will say next.
As always, take this information with a grain of salt.
A lot is happening in the market and only time will tell where AMC and GameStop go next.
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