AMC Entertainment (NYSE:AMC) stock has reached a max cost to borrow of more than 1,000% (1.04k%), per Ortex data.
The last time AMC’s CTB surged past 1,000% was back in April and early July.
AMC’s cost to borrow average is currently reported at 974.83%, respectively.
The cost to borrow, per Ortex, is the annualized percent of interest on loans, typically borrowed by brokers and hedge funds.
This percentage figure may change on a daily basis and level out through its ‘cost to borrow average’.
According to the Securities Lending Agreement (SLA), this fee must be charged prior to the stock being borrowed.
Short sellers rely on brokers to have stock shares available to borrow.
Stocks on the hard-to-borrow list may not be short-sellable or have higher stock loan fees, hence why we’re seeing AMC’s cost to borrow at 1,000%.
AMC Entertainment is in high demand, both for short sellers and long investors.
But with fees this high, is it really worth shorting the movie theatre company?
AMC Entertainment stock is currently down -4.58% this year-to-date.
Here are the latest developments happening with AMC Entertainment today.
AMC Shareholders Have Now Saved The Movie Theatre Company Again
AMC shareholders have now saved the movie theatre company again after two major proposals were finally passed following an exhausting lawsuit.
A reverse stock split and conversion of APE shares to common stock will now go into effect later this August.
AMC’s 1-for-10 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.
CEO Adam Aron says these dilutive proposals will help AMC Entertainment raise plenty of cash to survive another catastrophic event.
“AMC must be in a position to raise equity capital. I repeat, to protect AMC’s shareholder value over the long term, we MUST be able to raise equity capital.
That is especially the case now with the added uncertainty caused by the writers and actors strikes, which could delay the release of movies currently scheduled for 2024 and 2025.
If we are unable to raise equity capital, the risk materially increases of AMC conceivably running out of cash in 2024 or 2025, or of AMC being unable to satisfactorily refinance and stretch out the maturity of some of our debt (which is required of us beginning as early as 2024.)
The risk of financial collapse is not whimsical. Cineworld/Regal, the second largest movie theatre chain in the world, fell into bankruptcy and their equity holders were essentially wiped out. Bed, Bath and Beyond which was viewed as the third most watched meme stock, also fell into bankruptcy and their equity holders also were essentially wiped out.
Fortunately, at AMC, we have been much smarter, much more agile and much more skillful. We have risen to every Covid challenge heretofore, and I have every confidence in our continued ability to successfully navigate through these complicated times,” Adam Aron said in a July letter.
Also Read: AMC Is Now Hit With a New Class Action Lawsuit
Why Does AMC Stock Keep Getting Shorted?
AMC Entertainment continues to be a strong target by Wall Street, but why?
Movie theatres are no longer dead, and AMC Entertainment is no longer on the brink of going bankrupt.
Giants Amazon and Apple are now investing billions of dollars in the movie theatre industry, which is going to bring more movie titles to cinemas across the country including industry leader AMC Entertainment.
Today, AMC’s short interest is high at 28.48%.
AMC’s cost to borrow has surged as high as 1,000% — showing there is a scarcity of shares to borrow and a high demand to short the stock.
CEO Adam Aron has stated that the only thing the company needs to enter profitability again is more movie titles, and they’re coming.
So why does Wall Street continue to overleverage themselves and fight the movie theatre chain?
I’d love to hear your thoughts in the comment section below.
Also Read: Everything You Need to Know About an AMC Short Squeeze
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