AMC and GameStop have had an incredible amount of FTDs, or failure-to-delivers.
These are orders that have not been executed in options, and are usually a result of a ‘short party’ not owning or not having all of the underlying asset.
This has led retail investors to the educated assessment that synthetic shares are floating in the market; shares known as naked shares used to short a stock.
According to Investopedia, “Despite being made illegal after the 2008–09 financial crisis, naked shorting continues to happen because of loopholes in rules and discrepancies between paper and electronic trading systems.”
The movie theatre industry is no longer struggling to attract movie lovers back to the big screen.
While pandemic lockdowns threatened the existence of thriving cinemas, rapidly growing numbers of attendees have continued to grow over the past two years.
The only thing movie theatres are missing is more movie titles, says CEO of AMC Entertainment Adam Aron.
As “Avatar: The Way of Water” gets closer to the $2 billion mark at the worldwide box office, James Cameron says it’s a reminder that moviegoers still value the theatrical experience in an era of streaming dominance.
“I’m thinking of it in the terms of we’re going back to theaters around the world. They’re even going back to theaters in China where they’re having this big COVID surge. We’re saying as a society, ‘We need this! We need to go to theaters.’ Enough with the streaming already! I’m tired of sitting on my ass. Source:Variety.
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Shareholders are preparing for an AMC short squeeze as the stock continues to trend upwards and break new levels of resistance.
The movie theatre stock is up +18.40% on the month and up more than +37% in the past week.
Volume has steadily increased and even surpassed the average trading volume of 30 million.
AMC shareholders are speculating big moves may be underway as the rising price triggers short sellers to close out their positions.
AMC’s current short interest is still high at 19.76% per Fintel.
This means there is plenty of shorting in the stock for retail to trigger another massive price move like they did in January but more specifically in June of 2021 when the stock soared to $72 per share.
The company has performed well considering it almost faced bankruptcy early last year.
AMC Entertainment has beat quarterly earnings since 2021, striking confidence for an AMC short squeeze in 2022.
And the cost to borrow short shares has also skyrocketed in recent times.
Borrowers are now paying a whopping 66.4% to short the stock!
This is big news.
Let’s discuss it more below.
AMC Short Interest Today
According to Fintel, AMC’s short interest today is sitting at a high 19.76%.
AMC shot up to $72 per share last year when the stock was heavily shorted around 20% short interest.
AMC’s short interest came down to approximately 14% when it had reached its all-time high of $72.
The stock’s price may have come down a long way, but shorting has increased since and so has the short interest.
But AMC is seeing a slight bounce as it rejects the major level of support around $6 per share, currently trading between $7.50 and $8.
Heavy buying pressure is all the movie theatre stock needs to begin following previous trends back up to $9, $14, and $20+ levels.
If retail investors are able to successfully trigger this event, a short squeeze is inevitable.
What makes AMC more interesting now than ever is how high short sellers are paying to borrow the stock compared to earlier this year.
Stonk-O-Tracker is reporting a whopping 66.40% short borrow fee rate.
This is the annual fee it is now costing hedge funds to short the recovering movie theatre chain.
Liquidation across the markets could explain the obligation to keep up with such a high fee.
But that’s not all, AMC’s short borrow fee rate was as high as 77.80% on Wednesday.
The question is, how long will hedge funds be able to keep up with these losses as retail investors continue to buy and hold AMC stock?
FUD Grows but the Community Still Stands
There are many doom prophets infiltrating the retail community urging investors to sell their AMC shares.
Claiming that AMC is dead, and it will never squeeze.
Now more than ever, short sellers opposing heavy retail volume are trying to scare shareholders out of their money.
But the AMC community is still standing strong.
Is an AMC short squeeze happening soon?
The probability of retail investors squeezing shorts again is not a far-fetched idea.
We could begin to see bigger price action very soon.
“The SEC’s determination that the DLimit order does not violate the Exchange Act by unfairly discriminating or unduly burdening competition was reasonable and supported by substantial evidence,” the court found.
And now the industry is fighting the SEC on the possibility of eliminating payment-for-order-flow (PFOF).
A practice where market makers pay brokers a fee to reroute retail orders over to them.
Market makers tend to be short-biased and may use retails orders against them in a variety of ways.
AMC’s Fundamental Growth
AMC Entertainment has been improving fundamentally since its first quarter of 2021 when retail investors injected the company with billions of dollars in liquidity.
The movie theatre chain company had its best 2nd quarter in 3 years, seating more than 59 million guests, up 61% from two years prior.
In Q2, AMC had $52 million of positive operating cash flow and $107 million positive EBITDA, which is relative to the strength of a company.
The company ended Q2 with $1.18 billion in liquidity, a trend we’ve seen in the past with Q1 of 2022.
AMC announced in Q2 earnings it had reduced its deferred rent by more than $250 million and planned to reduce it by another $40 million ending the year.
Dark pools are somewhat of a mystery to new retail investors. We hear about them a lot within the AMC community, especially through Trey’s Trades. We know that they allow hedge funds to make undocumented trades behind doors.
So what exactly are dark pools? And, is something being done about them? I want to expose this subject today.
Welcome to Franknez.com – the blog that protects retail investors from FUD media. Today we’re discussing dark pools.
Lets get started!
What is a dark pool?
A dark pool is basically a financial forum or platform for trading stocks or other securities. Dark pools are privately organized and are known to be an alternative trading system.
These ATS’s are seldomly regulated.
The concerns regarding dark pools and AMC Entertainment has been that we simply don’t know what these communities are hiding from the SEC. This slimy strategy is what’s known as backdoor buying and selling.
Why are dark pools used?
Dark pools give hedge funds an advantage in the sense that they are able to conceal their moves. We can only speculate what type of information is being hid from the public here. Details within these dark pools are not accessible by the trading public.
This lack of transparency may allow dark pools to conceal information such as:
Any discussion regarding malpractice in the market
Inaccurate filings and reports
Dark pools can very well be the place where short sellers get together to discuss strategies and the ruining of companies.
It could be the reason why we don’t know how many short sellers are shorting ‘meme stocks’ and other information that would otherwise prove a fair market for both institutions and retail investors.
Is the SEC looking into dark pools?
In a recent article regarding the high possibilities of automated margin calls, I point out some research I found on Gary Gensler, Chairman of the SEC.
He publicly announces that the SEC has been observing hedge fund activities since January and are taking action to regulate these entities shorting AMC and other ‘meme stocks’.
One of Gary’s proposals states that hedge funds could face 13-F filings. These filings would provide the SEC with insight on equity as well as dark pool disclosure.
I trust we will begin to see this new chairman make the right calls. It’s time for change and our generation will be the ones to make it happen.
Dark pools could explain the low short borrow fee
Could dark pools be the explanation as to why the short borrow fee is so low for hedge funds shorting AMC and GameStop? Now, because so much information is in the shadows, this of course is only speculation.
According to Investopedia, dark pools can charge lower fees than exchanges because they are often housed within a large firm and not necessarily a bank.
Why do these large firms (hedge funds) have this much power in the first place? This advantage is completely deceitful and unruly. It really does make you look at the SEC and think why in the world has no one taken action sooner.
Are dark pools illegal?
Dark pools are not illegal but they are certainly unethical. Per the SEC, we can expect real regulation to surround these exchanges relatively soon.
The Bloomberg Tradebook is a dark pool that is owned by Bloomberg LP. Bloomberg is a financial media company that has been trashing AMC Entertainment for quite some time now.
Bloomberg has published FUD (fear, uncertainty, and doubt) articles in efforts to scare people out of their money. This raises questions regarding the ethics of these manipulators who gather behind close doors in order to stray the public from squeezing shorts out of their positions.
Other dark pool exchanges
Institutions such as Morgan Stanley and Goldman Sachs also offer private trading to their clients through the use of dark pools.
The main concern here is that the information that is made public to the SEC can easily be manipulated. Mainly to conceal foul play and inaccurate information.
The information that is available on Stonk-O-Tracker regarding AMC and dark pools is the percentage of trading within these forums/exchanges; which is usually relatively high.
How does this affect AMC stock?
These private exchanges may be illegally trading naked shares behind close doors refraining AMC’s stock price from further climbing. Although AMC is up nearly 3000% year-to-date, hedge funds continue to attack it through sell walls and short ladder attacks.
And since these private forums could potentially have been getting away with inaccurate reports, the possibility of foul play in the market is certainly there.
AMC Dark Pool Trading
Andrew Hiesinger, CEO of Quant Data took to Twitter to expose AMC’s current dark pool trading volume.
Quant Data provides retail investors with real-time options order flow, alerts, dark pool prints & levels, and news. There has been approximately 34 million shares exchanged in dark pools just in today’s trading day (8/18).
This equates to $1,268,475,800.46 in notional value, says Andrew.
64.21% of trading in dark pools won’t allow AMC’s stock price to reflect the actual price action. This primarily because this amount of trading is done behind closed doors where buy orders aren’t being reported.
This form of manipulation is clouding AMC’s real share price. #DarkPoolAbuse has been trending on Twitter.
Bookmark this article for updated news on dark pool abuse in AMC.
How can retail investors fight these predatory trading practices?
Retail investors have several advantages over hedge funds shorting AMC and other ‘meme stocks’. The community must stay the course if they are to squeeze these short sellers out of their positions.
Not only are hedge funds losing billions, but the SEC has finally begun to implement new regulations that could automate margin calls in overleveraged accounts. I’m personally not worried. These house of cards are falling at the times they should.
Leave your thoughts below.