Tag: AMC Margin Call (Page 1 of 2)

What Are Dark Pools in Stock Trading? (AMC)

What are dark pools in the stock market?
AMC Dark Pool

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.

Franknez.com

Welcome to Franknez.com – the blog where you can digest content on personal finance, side hustle ideas, entrepreneurship, and trending investing topics.

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:

  • The illicit activity of naked shorting
  • Explanations behind millions of fails-to-delivers
  • 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?

SEC dark pools gary gensler

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.

dark pools Investopedia
via. Investopedia

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.

Bloomberg Tradebook

bloomberg tradebook dark pool SEC

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?

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.

Andrew Hiesinger AMC Dark Pool Data

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.

Read: 6 things retail investors holding AMC stock should know

Support the blog on Patreon.

Twitter | Facebook | Instagram


How Soon Will Hedge Funds Get Margin Called? (AMC)

How soon will hedge funds get margin called?
When will hedge funds get margin called? #AMCsqueeze #AMCstock

Retail investors all want to know. How soon will hedge funds get margin called? I’m going to be updating this article with new information as it becomes available so be sure to bookmark it.

If you’re investing in AMC or GameStop, this article will prove to be of value to you. You’ve done an outstanding job. You’ve bought the rips and dips but most importantly, you’ve held.

Lets go over the data that is currently available regarding margin calls and hedge funds. There are some incredible things happening behind the scenes that you need to know.

franknez.com

Welcome to Franknez.com – the blog where you can digest content on personal finance, side hustle ideas, entrepreneurship, and trending investing topics.

Lets get started!

I want to give a massive thank you to my readers. A lot of you have just recently started following me and I’m very grateful for your support. I love seeing the community sharing FrankNez content on social media. It brings me great pleasure to know I’m providing value in your daily lives.

What is a margin call?

I published a piece fully dedicated to what a margin call is in the stock market world some time ago. In short, a margin call occurs when the value of an investors brokerage account falls below the broker’s required amount. This is when a broker demands that an investor deposits additional money into their account so that it meets the minimum requirement.

A margin call is usually an indicator that a security (asset) held in the margin account has decreased in value. When a margin call occurs, the investor must either add funds to their account or liquidate (sell) some of their assets in that account.

Why does a margin call occur?

  • It may occur when an account runs low on funds usually as a result of a losing trade
  • A margin call occurs when a demand for additional capital is required to meet the minimum margin requirement
  • Brokers may force traders to sell assets, no matter the current market price, in order to meet the margin requirement if the trader does not deposit the funds

If you’re a new retail investor and have recently joined the ape community then you’ve more than likely heard the term margin call before. A margin call is basically a 50/50% chance a short squeeze may occur on the spot.

However, even if hedge funds are able to keep enough capital in their margin accounts to keep them afloat, at some point they’ll have to cave in. Hedge funds are losing billions of dollars and this game is only costing them more money each day that passes.

Bloomberg News on Gary Gensler / Margin Calls

Margin call hedge funds

In this video, Bloomberg News discusses Gary Gensler, the new SEC chairman’s concerns of overleveraging and manipulation in the stock market.

This five minute video is important to log because it demonstrates and acknowledges the concerns in the market. Perhaps the SEC was incompetent in the past to say the least. But it looks like we might be looking at some change here community.

And although this particular video was published on May 6th, below are some things Gary Gensler is already proposing in order to protect retail investors and the overall market in general.

SR-NCSS-2021-002

SR-NSCC-2021-002 AMC automatic margin calls

This proposal from the SEC is massive if it gets approved. The SEC has heard you and they’ve been looking into hedge funds overleveraging their positions in AMC stock and other ‘meme stocks’.

This proposal would allow an automatic margin call system to margin call hedge funds with overleveraged accounts. This margin call system will essentially target short sellers on a daily basis and identify whether they are required to raise margin minimums or liquidate their positions.

SR-NSCC-2021-002 APPROVED 6/21/2021

SR-NSCC-2021-002 APPROVED margin calls
SR-NSCC-2021-002 Approved

Community, proposal 002 has been approved. These regulations have been placed in effect. However, as long as short sellers are able to keep up with their margin requirements then this regulation is rather neutral. A lot of these rules being put into place play in our favor the more money short sellers lose.

Total Return Swap AMC

The SEC and FINRA have gotten together to review the activity of ongoing overleveraging in the stock market. Hedge funds could soon face total return swaps per Gary Gensler, SEC chairman.

In a total return swap, the payer (hedge fund) must pay the interest on the underlying assets, plus any appreciation in the market value of the asset. This sounds a lot like shorts paying all short borrow fee owed on top of the market value of naked shares they’ve traded.

13-F filings and short selling disclosures

There’s a strong possibility that hedge funds also face 13-F filings. This filing will provide the SEC with insight on equity and dark pool disclosure.

Everything now seems to be falling right into place despite the continuous short laddering.

When will hedge funds get margin called?

Charles Schwab has recently raised margin requirements for both AMC and GME stock. This means that if they are unable to keep the minimum cash required in their margin accounts, they’ll be required to liquidate some or all of their positions!

This would create massive price action to trend in an upwards position. We know that short sellers are losing millions of dollars every day. Ladies and gentlemen. This is simply a waiting game. The point is going to come where they can no longer afford to be negative each day.

This movement is about to get on a whole other level of excitement. The fundamentals to this AMC short squeeze have not changed. All retail investors will have to do is hold until short sellers cave in and close their positions willingly, or brokers margin call them.

BREAKING NEWS: Charles Schwab raises margins on short sellers shorting AMC and GME stock

Charles Schwab raises margin requirements

Charles Schwab raises margin requirements

The broker is adjusting 100% margin requirements for AMC on all long positions, and 200% on short term positions. As for GameStop, the margin requirement is 100% on all long positions and a whopping 300% on short term positions.

All this essentially means is that short sellers will be required to have more cash at hand as collateral. So not only are hedge funds losing a lot of money every day but are now being required to put enough cash into their accounts to cover their entire positions if need be!

You know what happens if they can’t cover right? That’s right, margin call. Instant liquidation of their accounts resulting in the MOASS we’ve all been waiting for.

Margin calls will result in a short squeeze

At first we might experience what’s known as consecutive gamma squeezes. These are usually triggered by high volume in the market due to expiring call options in the money or very high purchasing days.

As more short sellers and hedge funds with larger short positions in AMC stock begin to cover, we will begin to experience the beginning of a short squeeze.

A short squeeze could last several days to several weeks. During this timeframe, the stocks price will continue to skyrocket as more short positions are closed.

It really does feel like we’re coming to an end here. This new beginning is going to change millions of people’s lives and I’m glad to be that first person to congratulate you.

NSCC-2021-010

Proposition NSCC-2021-010 allows the NSCC to act as a third party lender to oversee every transaction between lenders. It prevents short sellers from using naked shorting strategies and from creating FTDs.

This is one of the biggest AMC news yet regarding the stock. The NSCC is also requiring that short sellers have more cash at hand to limit overleveraging their positions.

This proposal can go into effect at any time but may take a few weeks in case something needs to be revised. Once approved, AMC stock will surge past $40 leading back to higher levels of support.

When should I exit my position in AMC?

I wrote an AMC exit strategy guide to help the community make a strategized decision on how to sell when AMC squeezes.

I do want to relay that this is only my take on it. Many of you already have your own exit strategies, I understand this. Regardless, it’s there if you need it and would like insight from a different perspective.

And lastly . . .

Franknez.com

If you gained value from this article be sure to share it with the rest of the community. Thank you to everyone publishing this information on Facebook, Twitter, Reddit, and Discord groups.

If you would like to support the blog you can do so on Patreon where you will also be able to access exclusive Frank Nez content.

And remember, this article will be updated as more information is revealed to the public so be sure to bookmark this page for your convenience.

Read: Here’s why people are buying AMC stock: Investors guide

Twitter | Facebook | InstagramExclusive content on Patreon


Here’s Why People Are Buying AMC Stock: Investors Guide

Here's why people are buying AMC stock
Why are people buying AMC stock?

By now you’ve probably heard all the hype surrounding AMC Entertainment. If you’ve been following me for a while then you know I’ve been covering AMC since the beginning of February.

It is absolutely amazing to see more and more people begin to invest in the stock market. You can bookmark this step by step guide on how to invest in the stock market in case you haven’t opened your brokerage account yet.

My goal is to help guide you in your journey to becoming financially free.

franknez.com AMC news

Welcome to Franknez.com – the blog where you can digest content on personal finance, side hustle ideas, entrepreneurship, and trending investing topics.

Lets get started!

Why are people investing in AMC stock?

AMC stock 
AMC Entertainment
AMC movie theater

People have the chance of a lifetime.

AMC was forced to close its doors to the world when the pandemic hit. AMC Entertainment suffered huge losses and hedge funds began doubling up on their short positions in attempts to bankrupt the company. Their goal was to get rid of the most respected movie theater franchise of all time, profit, and wash their hands clean.

Retail investors gathered on subreddit communities and decided to buy the stock and drive the price up; like they did with GameStop. This teamwork caused a gamma squeeze driving the price action from $2 up to $20. This allowed AMC Entertainment to raise enough capital for bankruptcy to no longer be on the table.

Since then, AMC Entertainment has been able to raise more than $2 billion dollars from life long partners. These partners have supported AMC since the inception of the company 100 years ago.

Retail investors saved AMC and are now looking to squeeze short sellers out of their positions.

AMC is currently the heaviest shorted stock in the market

Analysts discovered that AMC has a massive short squeeze potential. A short squeeze is a massive move up in price action. Short squeezes are violent and may produce 100%, 1,000%, and 10,000%+ gains.

What we discovered is that hedge funds shorting AMC Entertainment were overleveraging their positions. Meaning they were borrowing shares from brokers at an interest to drive the price down.

Short selling is the process of borrowing a share, selling it much lower, and profiting the difference when they pay back their lender. Short sellers usually bet on the price of a stock to tumble.

Here’s an example of short selling

AMC’s stock price was around $30 back in the booming party economy of 2016. Say short sellers borrowed 10 shares of AMC for $300 betting it would drop. Shorts would then sell the stock at the market value of $300 (you and I purchase it at $30) and wait for it to drop in due time. If the stock price fell to $25 per share then the short seller could buy back those 10 shares, profit the difference ($50) and give back the 10 shares they borrowed back to the lender.

AMC stock is going up, what happens then?

AMC stock is going up

Here is what’s attracted millions of retail investors and huge institutions such as Wells Fargo, Vanguard, Morgan Stanley and many more to AMC Entertainment.

AMC stock is no longer on the brink of bankruptcy and it is having an extremely healthy bullish run. The reason we’ve seen consolidation and red days is due to the massive amount of short ladder attacks conducted from short sellers and hedge funds.

A short ladder attack is a method used by short sellers where they transact synthetic shares amongst one another to drive the price of a stock down. This is only one of many ways we’ve seen foul play in the stock market.

Hedge funds shorting AMC are losing millions of dollars every day they don’t close their positions

Now here’s where it gets interesting. What happens to short sellers when a stock they’re shorting is going up instead of down?

The fee to borrow the share from their lender goes up and they’re pressured with two options.

  1. Pay the short borrow fee and continue to hold your short position in hopes the stock price will go back down, or
  2. Close your position, take your profit or loss, and possibly go long instead

Now, hedge funds such as Citadel and Melvin Capital have been quite stubborn. They’ve continued to overleverage their short position in AMC Entertainment to drive the price action down.

However, the AMC community isn’t leaving. It’s personal now and they’re willing to buy and hold the stock until shorts are squeezed out of their positions. Analysts have figured out that retail investors can continue to drive the price action up with enough volume in the stock.

Recently, there’s been a surge of new retail investors buying AMC stock. Short sellers keep tackling the upticks every time AMC soars. However, retail investors continue to buy the dips causing consolidation. AMC stock is currently trading around $40.78. The stock has been on discount recently but it continues to go up.

The data shows a MOASS

MOASS, mother of all short squeezes.

Brokers have never seen this much shorting occur in a single stock in the existence of the stock market. The data predicts a short squeeze unprecedented like anything we’ve ever seen historically.

This is primarily due to the amount of synthetic shares and overleveraged positions that must be covered during a margin call. A margin call could force shorts out of their position resulting in a short squeeze.

How high can AMC’s stock price go up to? There’s no ceiling. However, more data will be released as the stock begins to squeeze.

Related: How high can AMC stock price skyrocket up to?

Markets are being liquidated

Massive institutions have begun to liquidate assets in both the stock market and crypto market. Retail investors cannot cause the extreme price drop we’re seeing in both markets.

I speculate institutions are building capital to prepare for margin calls or raised margin requirements.

Proposal ICC-007 APPROVED

This proposal provides brokers with the flexibility to raise margin requirements on investors holding risky investments, such as a short position in AMC.

Brokers need collateral. If short sellers cannot meet the margin requirement then they will be forced to liquidate their entire positions, resulting in several gamma squeezes and inevitably a short squeeze.

If margin requirements are raised then shorts will have to either deleverage their positions (gamma squeezes), or fund their accounts with capital. Is this massive selloff in both the stock market and crypto market related to potential AMC margin calls and regulations? I think so.

Read: How soon will hedge funds get margin called? (AMC)

An abundant opportunity

amc money

The reason why retail investors are buying AMC stock is for the opportunity of a lifetime. Not only is the public starting to invest but big institutions on retail investors’ side known as ‘whales’ are bulking up on the stock.

“Beware of the stock” (paid) articles

Platforms such as the Fool, MarketWatch and InvestorPlace are hedge fund affiliates. Retail investors encourage newcomers to do their own due diligence oppose to reading FUD articles (fear, uncertainty, and doubt).

Is it too late to buy AMC stock?

That depends. Look at AMC’s current share price. If it squeezes to $100, $1,000, or even $10,000+ would the trade have been worth it if you bought today at it’s current share price? You decide.

More info on AMC stock

Here’s where you can find more helpful information regarding AMC stocks’ data & predictions, technical analysis.

franknez.com amc

On the very top right part of my blog you can see my top 6 articles at the moment are on various AMC posts. These posts go further into detail with DD (due diligence) surrounding AMC stock and the short squeeze data.

Related: Charles Schwab raises margin requirements for AMC and GME stock

Best YouTubers covering AMC Entertainment stock

Trey’s Trades

Credit will be given where it’s due. Trey’s Trades is the man, the leader of this AMC movement. Nothing but tremendous respect for this brother. Take the time to watch his videos, I promise you you will not regret it.

Roensch Capital

For less entertaining but otherwise very valuable information on AMC stock, watch Roensch Capital. RC provides commentary on chart analysis.

ReviewDork

I was quick to connect with Gabe from ReviewDork. His videos are honest, genuine, and entertaining to watch. This channel is currently one of my favorites covering AMC and I know you’ll enjoy Gabe’s videos as well.


Questions regarding AMC stock?

Join my Discord group. Members here share new videos, posts, and conversations relating to AMC. Members here get the links to new articles first 😉 If you join the newsletter you will receive weekly emails from me when I post a new article. You can always connect with me on social platforms to see them as well.

AMC with franknez.com discord

Support the blog on Patreon!

Not investing in the stock market yet? Click here to learn how!

Twitter | Facebook | Instagram


AMC Stock Is Primed To Bounce Back Up: MOASS

AMC Stock is primed to bounce back moass
AMC MOASS

AMC’s downtrend was not violent. Ladies and gentlemen the community has not sold. AMC’s turnover ratio is extremely low but more on that later.

AMC stock is about to bounce back up and I’m going to explain why. The data presented below does not lie, get excited.

franknez.com

Welcome to Franknez.com – the blog where you can digest content on personal finance, side hustle ideas, entrepreneurship, and trending investing topics.

Lets get started!

Community – I want to start off by saying thank you for sharing this information with the public. The community is growing every day and more retail investors are opting in for the opportunity of their lifetime.

I also want to give a special thanks to my Discord group who are always sharing FrankNez articles on social media. You guys rock.

AMC stock hits a new bottom?

AMC stock has been trading around the mid $30 range for a few days now. The stock dropped to the low $30s before beginning to consolidate upwards to mid levels now.

For about a month straight we’ve experienced AMC consolidate in a downwards trend so this little bounce back up could indicate the stock has hit a new bottom.

The last time AMC hit a new bottom was back when it dropped from $20 per share to the $5 per share. People bought AMC stock on the way down and were left bag holding for quite some time. Those who held have a huge payout on paper.

So if you bought at $70 per share while it was going down just be patient. Great things come to those who wait. The community has done an amazing job at keeping everyone informed when FUD arises. We’ve been able to eliminate it as soon as we see it.

The AMC community has never been stronger and more unified. Despite the desperate media attempts to divert the public from selling their stock, retail investors continue holding.

AMC has a low turnover ratio, what does this mean?

A low turnover ratio reflects a buy-and-hold investment strategy. AMC has a 3% turnover ratio which means almost every single ape holding AMC stock is not selling.

AMC turnover ratio

This data confirms the dip of the price is not due to retail investors selling. Short sellers have been borrowing millions of shares to short the stock. With majority of retail investors holding, there was very little volume to counter these synthetic sell walls.

Retail investors continue to hold the one asset short sellers need to buy back. The available shares to borrow has also gone down quite significant. This number has gone down to the hundreds of thousands.

Short sellers could continue to overleverage their positions but are currently under high scrutiny from broker firms. What will push AMC’s stock price right now will be buying power. This bullish momentum could ignite short sellers to close out their positions as the price and margin requirements continue to rise.

I believe this will be the last time we see AMC in its $30s. Those who took the advantage to bulk up this discount will experience mainly gains moving forward.

100/100 AMC short squeeze score

S3 Partners are a short interest and securities finance data provider. They deliver real-time and the most accurate short interest analytics.

The tools that S3 partners provides TA’s (technical analysists) allow us to get a technical analysis perspective on the short interest data. Trey and other traders saw AMC had a massive short interest which meant that by using the buy-and-hold strategy, retail investors have the opportunity to squeeze them out of their positions.

S3 Partners AMC short squeeze score

Well now we’ve been receiving a lot of data from these niche data collectors saying AMC is primed with a perfect score to squeeze. S3 partners is relaying a score of 100 out of 100.

We’ve seen Fintel’s short squeeze score reach 10/10 on their page as well. This is no coincidence as the data that has been made public by community leaders is now being reflected heavier on these platforms.

We’d be caught in a pickle if the data said otherwise but the numbers don’t lie. Whether AMC is trading at $30, $40, or $50, the stock is primed for a short squeeze.

Retail investors will have to continue to buy and hold the stock to see this come to fruition. If you’ve been doubting where AMC has been going, this should clarify so much. Trust the data.

Special thanks to r/amcstock

I want to give a special thanks to the creator of r/amcstock. I will not mention his name but we connected last month when he joined my Discord group.

This subreddit has been a tremendous help to the movement as it has allowed the community to stay informed. I also want to thank those of you who have been sharing my DD and articles on r/amcstock.

This is actually how the subreddit creator and I connected. He noticed you, the community sharing the information I’ve provided so thank you.

r/amcstock AMC

And of course this information would not be here if it weren’t for OisinB. Here’s the direct link to this subreddit post.

Hedge funds face serious scrutiny

If you’re following me on Twitter or are subscribed to my newsletter, you’ve more than likely already seen the massive scrutiny short sellers are currently facing.

Not only has Charles Schwab raised margin requirements for short sellers shorting both AMC and GME, but JP Morgan has jumped on the train as well.

JP Morgan warns hedge funds of intraday margin calls. If you missed that excerpt make sure to read it as it’s huge news! Brokers have just about had enough and taking the necessary precautions to prevent severe losses.

So what’s the deal with hedge funds right now? We know they’re losing millions each day. They’ve been able to drive the price down behind closed doors using dark pools. Naked shorting has now gone mainstream thanks to Melissa Lee from CNBC and Charles Payne from FOX Business.

Zoom out to look at the entire picture and you’ll find good karma is leaning towards the retail investors.

For info on AMC’s and GME’s negative beta, read the article here.


Follow me on: Twitter | Facebook | Instagram | Patreon


AMC Stock: Could This Be The Dip Before The Rip?

AMC dip before the rip
AMC Dip Before The Rip

Why is AMC stock falling? If there’s anything we can learn from Volkswagen’s short squeeze is that it too dipped before reaching nearly $1,000 per share. Before Volkswagen’s share price drastically declined it had a solid bull run. Sound familiar?

Is this what’s happening with AMC stock? Ladies and gentlemen, strap on your seatbelts. Shorts are under high scrutiny and their accounts keep getting hit by intraday margin requirements.

Failure to meet margin requirements and it’s margin call time baby. This could very well be the start to that new life.

franknez.com personal finance blog

Welcome to Franknez.com – the blog where you can digest content on personal finance, side hustle ideas, entrepreneurship, and trending investing topics.

Lets get started!

Hedge funds vs retail investors

AMC continues to trend downwards shortly after a new wave of retail investors joined the ape army. Many of you are shaking in your boots right now.

Straighten up soldier, you’ve entered a financial war you didn’t even know existed. Are you going to let the people who screwed you over back in 2008 take your money again? Or are you going to hold your stock until you squeeze them out of their positions?

Community, they’re trying to scare you out of your money. Your losses on paper aren’t real until you make them real. Don’t collect your losses, hold your stock. Not financial advice, but advice from a friend.

Hedge funds have been finding loopholes to drive the price down while the SEC has gotten paid to turn the cheek. The sight has not been pretty. This is financial war.

Why is AMC stock going down?

The ape sentiment has not changed. We continue to buy and hold, so why is AMC stock going down? Could this be AMC’s dip before the rip? The answer might lie in the trades occurring in dark pools.

Dark pools are basically private trading systems inaccessible to the public eye. Trading here could be naked shorting which could be causing the price to fall using synthetic shares.

These shares aren’t real, they’re made up. If there’s anything we’ve discovered during this entire movement it’s that hedge funds have way too much power than should be allowed. That and the SEC has been compromised as we’ve seen they have absolutely no authority over these entities.

AMC’s stock price could be temporary

Reports have been made that the trading occurring in dark pools has been a whopping 60+%. This means more than half of AMC’s trading has been occurring in these private trading systems where retail investors have absolutely no way of accessing.

AMC dark pool data
AMC Dark Pool Data

Retail investors aren’t liquidating their positions, hedge funds are behind something much more maleficent. And in some cases, hedge funds aren’t even obligated to report this information.

Ladies and gentlemen, we must fight this corruption together. The SEC has been compromised and it is up to us to get loud. The good guys will win. But justice needs to be served in more than one area once this chapter is over.

A closing opportunity?

As AMC’s share price continues on this downtrend, is it possible shorts will cover? Yes they’re illegally driving the share price down behind closed doors but is it to manage their losses?

We know it’s costing them millions of dollars to hold their positions ever day. They’ve been paying a fee to borrow the stock all year. Will they take this opportunity to close their positions without significant losses and call it a day? Let me know what you think in the comment section below.

The ape community will only buy more

See the thing is that hedge funds have not exhausted the community. They’ve only made us hungrier. Our why, our reasons for this trade is much bigger than theirs.

AMC Entertainment is not bullish nor bearish, it’s apeish. And we’re not leaving until every single synthetic share has been covered.

And if you’re holding losses on paper right now and don’t know what to do, borrow my strength. I am not leaving you behind and I am not selling my position until we squeeze.

We’ve been there. I’ve been there. Our conviction gets tested when things get tough. Any major drop in the stock and expect apes to bulk up more than the first time. We aren’t going anywhere.

AMC compared to Volkswagen

AMC compared to Volkswagen

If we compare AMC to Volkswagen before it squeezed you’ll see a similar pattern here. Both AMC and Volkswagen had a bull run before beginning to decline.

This decline bottomed out before shorts covered their positions at a more attractive price. This resulted in Volkswagen to squeeze.

Think about the investors who got out of the short squeeze play as it was coming down only to find out the stock squeezed once it found its bottom.

Now put yourself in that position for just a moment. How would you feel if you liquidated your position right before AMC squeezed? I’d love to hear from you down in the comment section below, this is a challenging question.

Volkswagen, like AMC was also a short squeeze play. It took Volkswagen to rise and fall only to stand up even bigger than ever before. Kind of like life, ya know? Moral of this comparison? There was a dip before the rip.

How low will AMC go before it skyrockets?

Seeing as AMC’s highest price point prior to this movement was $35 back in 2016, it’s highly likely shorts took positions from this price range below. What they’re doing is a group effort so maybe John started shorting AMC around $20 and they’re not leaving John behind.

I mean who knows right? One thing is certain. Once AMC’s share price gets lower, apes will buy the stock at this significant discount inevitably causing AMC to rise again; forcing shorts to cover their positions.

Failure to do so would result in continuous losses. And if it takes doing this all over again I’ll do it. The short interest does not lie, the shares on loan do not lie, ladies and gentlemen the data does not lie.

The question here is, are you going to miss out on this opportunity? Or are you going to let it run its course? You decide.

Bookmark: An excellent AMC exit strategy guide: Short squeeze

Join the Discord community

I created this safe community where we talk about AMC 24/7. Members from all around the world are learning something new every day. Here’s a personal invite to the club. See you there.

franknez.com amc discord

BREAKING: Are hedge funds about to get margin called by JP Morgan?

Connect with me on social media! And if you’d like to support the blog you can do so over at Patreon.

Twitter | Facebook | Instagram


Are Hedge Funds About To Get Margin Called by JP Morgan?

JP Morgan Margin Call AMC
JP Morgan Margin Call

According to RISK.net JP Morgan warns hedge funds of intraday margin calls. This sounds very similar to proposal 002. The U.S bank may demand margins up to “7 times per day” according to sources.

The tough love comes from the fear of losing money and covering hedge fund positions like global banks did with Archegos Capital earlier this year. It seems like they’ve started to notice a pattern here.

As always, I’ll give you my take on what this means for us retail investors and how it plays into AMC’s short squeeze news.

franknez.com

Welcome to Franknez.com – the blog where you can digest content on personal finance, side hustle ideas, entrepreneurship, and trending investing topics.

Lets get started!

Ladies and gentlemen banks have had enough. They’re tired of getting screwed over by hedge funds overleveraging their short positions. When hedge funds cannot cover the entire hit, brokers have to cover the rest.

JP Morgan is trying to prevent from becoming like one of the affected brokers that suffered significant losses due to Archegos shorting Viacom and Discovery earlier this year.

Although the SEC might be oblivious to what’s going on, this bank sure isn’t. And if you remember, Charles Schwab has also raised margin requirements for short sellers shorting both AMC and GME stock.

Archegos meltdown resulted in billion dollar losses for global banks

Archegos JP Morgan

Banks to massive losses due to Archegos Capital overleveraging their positions in highly shorted stock such as Viacom and Discovery.

Wells Fargo was one of the banks that did not suffer any losses. “We had a prime brokerage relationship with Archegos,” the bank said. “We were well collateralized at all times over the last week and no longer have any exposure.”

According the Reuters, Morgan Stanley lost nearly $1 billion dollars from the collapse of Archegos. Other banks hit were Credit Suisse Group and Nomura Holdings which were affected the most.

Global banks were expected to lose between $5-$10 billion dollars according JP Morgan. And now it seems JP Morgan is taking the precautions necessary to avoid enormous losses too. By issuing intraday margins, they make sure short sellers have enough cash at hand as collateral. This could possibly be the catalyst for what we’ve been waiting for.

If margin accounts cannot keep up with the daily demand for new cash in its accounts, JP Morgan may instantaneously close out overleveraged positions. This will cause AMC stock to soar.

Hedge funds and family offices are affected

Archegos was technically a family office managing billions in assets, not a hedge fund. Well now JP Morgan is demanding both hedge funds and family offices post more cash during the day if their trades loses value.

The news was provided to Risk.net by three people who are familiar with the matter. No further information aside from these intraday margin requirements were relayed by the publication.

If JP Morgan sees too much risk within some accounts, and they will, they have the power to liquidate margin accounts short selling both AMC and GME stock. The results would drive these stocks high enough to force all shorts out of their positions.

Managing margin call news expectations

It’s important for the community to take into consideration that most news regarding margin calls have merely been neutral, so far.

If this JP Morgan margin call news plays in our favor then excellent! We could very well begin seeing some short covering. But if it doesn’t, another catalyst will end up squeezing shorts out of their positions. This may be a new wave of volume or other brokers who do not want to risk their investments through these overleveraged hedge funds.

However, positive news like this should feed your conviction. When you’re in need of strength, borrow mine.

I personally believe were getting closer to this chapter coming to an end as hedge funds continue to face serious scrutiny. Think about this for a second, the cards are against them.

Retail investors, banks, whales, and the public are all against them. I’m interested to know your thoughts, leave me a comment below. Are you ready for this short squeeze? And when do you personally think this will liftoff?


Twitter | Facebook | Instagram | Patreon


AMC Gets Removed From The NYSE Threshold Securities List

AMC gets removed from the NYSE threshold securities list

Community, if it doesn’t play in our favor then it’s neutral. The game plan doesn’t change. AMC Entertainment has been removed from the NYSE threshold securities list. Retail investors are asking, why?

franknez.com

Welcome to Franknez.com – the blog where you can digest content on personal finance, side hustle ideas, entrepreneurship, and trending investing topics.

Lets get started!

It’s no surprise at all. Without wanting to speak on this possibility in the previous threshold securities article I published, it actually ended up happening. Hedge funds will more than likely use this rinse and repeat method which will allow them to cause more fails-to-deliver shortly after they’ve been taken off the threshold securities list.

So while they’re off the list now, expect them to be back on very soon. Rather than pay their dues on the 13th consecutive day, they let options expire with no issues. This could very well be the reason why AMC Entertainment has been taken off the threshold. It’s possible hedge funds did not let it get to the 13th consecutive day.

Why did AMC get removed from the threshold securities list?

It’s possible hedge funds drove the share price down last week in order to cover these positions allowing them to get off the threshold securities list. We saw a small spike after AMC’s share price dipped below $40. It would only make sense as to why we saw this particular movement in the price and why AMC is no longer on the threshold securities list.

Volume for call options in the money were over 15K and were exercised at $46. However, we won’t know whether these call options were executed properly or not. They could become FTDs at some point and get AMC back on the threshold.

Call options on Friday June 9th
Call options on Friday June 9th

Now, we know hedge funds are always finding loopholes to cheat the system and to cheat their own customers, because ultimately that’s what they’re doing right now.

Even if they create this rinse and repeat process, it’s only affecting short sellers more then it is retail investors. They’re borrowing so much money without realizing they eventually have to pay it back, no matter how long they keep this play going.

Prolonging the inevitable is leading short sellers to rack up more losses even if it’s only just on paper.

Manage your expectations

I’ve said this in my Discord before, all AMC news should be viewed as extra information for the archives, right? For documentation purposes only. If it doesn’t help us retail investor out then it is only neutral to this play.

The SEC might want to look like they’re actually doing something, but we all know in reality they are just being lobbied. Could the threshold have made a difference for the community? Yes, absolutely.

However, the ultimate game plan still stands; with or without the help of the SEC. Which by the way, we’re going to continue exposing them along the way too.

Hedge funds are carrying massive debt

Customers invested in these hedge funds should know their money is not producing money at the moment. It’s being used as leverage to fuel their partners egos. Unfortunately for these clients, a lot of money will be lost. The American people in general are going to lose their pensions and life savings due to these hedge funds overleveraging their positions.

Short sellers continue to borrow money from every crevice they can find. You know what happens when you borrow money? You eventually have to pay it back.

These red days don’t matter as long as retail investors hold AMC stock. And despite the current volatility, hedge funds are losing.

It’s important to remember that a red day doesn’t mean short sellers are winning. Red days mean there’s a discount for retail investors and an opportunity for short sellers to close lower. That’s it.

AMC & GME negative beta

Community, this is something else I want to point out. AMC currently has a negative beta of -3.95 and GME has a whopping negative beta of -7.05. So what is negative beta?

Negative beta less than 0 is an inverse relation to the market and is also known to be very rare. Well, what’s occurring with both AMC and GameStop is indeed unique and rather rare.

A negative beta for AMC and GME would mean that as the market crashes, both AMC and GME will react the complete opposite.

AMC Negative Beta
AMC Negative Beta

With talks of a stock market crash, AMC and GME seem to be the best vehicles to park some money in if you’re trying to avoid a stock market crash from affecting your net worth. Negative betas tend to do better when the stock market is down.

I haven’t seen anyone else touch on this topic but this is big information. There’s a strong chance for high profitability here that many seasoned apes have already seen on paper.

And if you just got into AMC stock, know this is only the beginning for you. Patience is key to making a trade of this magnitude.

Trust the process data

Why am I telling you this? Because these analytics say everything. The data and the numbers ultimately do not lie.

The SEC can pretend to do something about the manipulation but in the end we can only trust the data.

The process is going to lead us to many highs and many lows. The process is going to be one massive learning experience. Learning patience and educating yourself about what’s occurring in the stock market are going to be the two biggest lessons.

The data however, will always be present. The data does not change whether AMC is green or whether it is red. You don’t even have to trust me nor your favorite YouTubers covering AMC and GameStop. But I do suggest that you trust the data.

The Fool won’t cover this

Have you seen any financial platforms cover this? They don’t want you to know the data. AMC will eventually make it back to the threshold securities list but it won’t matter. The ape community must continue to buy and hold the stock in order to squeeze these shorts out of their positions.

This MOASS, it’s inevitable.

Read: Can the government interfere with AMC’s short squeeze?

Twitter | Facebook | Instagram | Patreon


AMC Stock Is No Longer Skyrocketing To The Moon

AMC Astronaut
AMC To The Moon

AMC is no longer going to the moon. It’s skyrocketing past Pluto. Today marks the 12th consecutive trading day AMC remains on the NYSE’s threshold list. If you don’t know what this means I’ll explain a little later.

As for short sellers, they continue to lose millions with each passing day as they continue to overleverage their positions in AMC stock. By amplifying their losses through debt, they’re also amplifying unlimited gains for retail investors.

Retail investors must continue to buy and hold the stock if they are to squeeze shorts out of their positions. Ladies and gentlemen, the movement is getting bigger and this is huge.

franknez.com

Welcome to Franknez.com – the blog where you can digest content on personal finance, side hustle ideas, entrepreneurship, and trending investing topics.

Lets get started!

AMC goes mainstream

In a recent interview with Joe Rogan, Adam Curry expresses his concern with the market manipulation in both GME and AMC stock.

“We know that you’re cheating on these companies like GameStop and AMC, etc., you’re cheating – you have a lot of shares that you say you have but they’re not really in the system, so we’re going to show you and we’re going to f*you by buying all the shares that are available so your short position goes through the roof..”

“This game is over” – Adam Curry with Joe Rogan

Expansion beyond the community

Word has gotten out of all that has been occurring with AMC Entertainment stock. Our DD is no longer just within our community, word is now getting around to several platforms.

These outlets are going to be bringing in new retail investors who will further accelerate the push that will trigger a short squeeze. AMC is now hitting the momentum it needs in order to close this chapter of our lives.

The waiting chapter that is. The celebration will drag on for many months and I cannot wait for that experience in the community.

Why the threshold security matters

Lets look at we can learn from GameStop before it began squeezing. GME stock began its ascend about a month and a half after getting listed on the NYSE threshold security some time in October.

What this outlines is simply that GME did begin to see massive gains after the threshold security fiasco. And as we know, history tends to repeat itself. We can further predict that AMC will too experience some sort of major price action once this has passed.

What is the threshold security supposed to do?

Companies make it on this list when they’ve had 5 consecutive days of fails-to-deliver. Fails-to-deliver are basically call options expiring the money that were never exercised, or executed.

Retail investors purchase premiums known as ‘calls’ and bet on the price of a share to rise. If the price of a stock is in the pocket of their projected share price, their bulk order of shares goes through at a discount.

So how is this important to AMC? Well, the threshold security states that if a company is on this list for 13 consecutive days then brokers must buy back all of the FTDs. Once these orders are closed the price of AMC stock is going to surge.

Now, if things work as they should, this momentum could trigger gamma squeezes inevitably leading to squeezing shorts out of their positions.

Why is AMC stock going down?

Short sellers are overleveraging their short positions with an insane amount of debt. This down trending consolidation is a result of heavy shorting in the stock combined with retail investors holding their positions.

AMC short shares available

Today alone we’ve seen 1.2 million short shares have been made available for short sellers to borrow. Hedge fund affiliate partners such as The Fool and MarketWatch can no longer sweep this information under the rug.

AMC Entertainment stock is the biggest stock in the market right now. It’s only going to be a matter of time before short sellers run out of borrowed shares and AMC stock continues its upward trend.

Are shorts trying to cover?

You might be asking yourself, why do hedge funds keep overleveraging their positions to insane amounts? I mean bankruptcy is no longer on the table for AMC Entertainment. There’s absolutely no way they can diminish this company now so what’s the deal?

Volkswagen Short Squeeze Chart

Lets looks at the Volkswagen short squeeze for just a moment. Volkswagen began to make a massive bull run before ultimately crashing back down beneath $30 allowing shorts to take the opportunity and close out their positions. In doing so the stock skyrocketed.

The Volkswagen drop was a massive loss on paper for most retail investors. Soon after this dip is when the stock experienced this short squeeze. Now the reason why TA’s (technical analysts) believe AMC’s short squeeze will be bigger is due to the incredible amount of overleveraging that has taken place during the course of several months.

How low will AMC stock go before shorts cover?

Now that’s the question. If we continue to see AMC’s stock price plunge due to the infinite amount of short shares being borrowed to drive the stock price down, when will shorts cover?

AMC stock 2016

Prior to the pandemic, AMC stock topped at around $35.30 back in December of 2016. It has been shorted ever since. This leads me to believe that this price point could very well be the highest level where short sellers break even.

Of course not every short seller started shorting at the top. But it’s safe to assume that most short sellers are willing to close out their positions in a price point where they can either break even or minimize their losses.

If shorts don’t cover at these levels, momentum will surge due to the discount forcing shorts to cover before the price rises again. Community, a short squeeze is inevitable.

Will you be able to stomach this drop?

These red days haven’t been fun to watch. But they haven’t been emotional either. At least not for majority of the AMC community which consists more of seasoned apes than new retail investors.

Here is where your conviction is truly tested. Traders have made their money right before the commencing of a short squeeze and that’s all find and dandy and what not. But will you be part of the bigger group that will hold this stock until shorts are squeezed out of their positions?

I can tell you I am. But the choice is yours and only yours to make.

Read: An excellent AMC exit strategy guide: Short squeeze

Franknez.com

Twitter | Facebook | Instagram | Patreon


Citadel Loses Billions: Hedge Funds Are Getting Dragged Down

Hedges funds lose billions of dollars shorting AMC Entertainment stock
Hedge funds shorting AMC Entertainment and GameStop continue to lose billions

Hedge funds such as Citadel and Melvin Capital are losing billions of dollars, and fast. They’re shorting a stock that is no longer on the brink of bankruptcy. This company is AMC Entertainment and it’s revival is thanks to the millions of retail investors buying the stock.

Citadel is one of the largest hedge fund managers in the world. And they’ve subsequently managed Melvin Capital to the ground. Melvin Capital suffered a loss of over 50% its first quarter in 2021 due to shorting AMC Entertainment and GameStop.

At some point you’d expect your clearing house to raise awareness on your risk management right? When you manage a group of hedge funds, you are responsible for the companies success, and failures. What’s even more insane is that short sellers continue to go against the tide despite suffering billions on paper. Citadel might just end up bankrupting some of its partners.

Franknez.com - the blog where you can digest content on personal finance, side hustle ideas, entrepreneurship, and trending investing topics.

Welcome to Franknez.com – the blog where you can digest content on personal finance, side hustle ideas, entrepreneurship, and trending investing topics.

Lets get started!

AMC retail investors now have the lead in this war versus short sellers. Newcomers are joining subcommunities and doing some detailed digging themselves. Bigger personalities are talking about AMC Entertainment’s once in a lifetime opportunity.

What collectively started out as a small community back in January is now becoming mainstream. There’s no going back. This group of retail investors only know forward.

CNBC shames short sellers

Hedge funds lose billions of dollars shorting AMC Entertainment and GameStop stock

CNBC’s Jim Cramer has publicly thrown short sellers under the bus in a recent video disusing the power of the retail investor community.

“Anyone shorting AMC or GameStop is out of their mind. Wallstreetbets is too powerful, and trying to bet against them right now is just giving them more ammo”, Jim Cramer. While you’re not wrong Jim, retail investors within the AMC community are known as apes, not wallstreetbets.

Jim Cramer is the host of Mad Money on CNBC and is a former hedge fund manager.

Investors shorting AMC and GameStop stock are estimated to have lost $754 million on Tuesday 5/25 alone, via ORTEX.

ORTEX Short Interest Data Software

ORTEX AMC Entertainment Stock short interest and data

ORTEX is a software that provides the most timely and accurate short interest available. They provide users with intra day and historical data for days to cover, shares on loan, utilization rate, cost of borrow and free-float on loan.

More hedge funds under Citadel’s management will be incurring loses very soon if they haven’t already. AMC Entertainment and GameStop stock are just getting started. When Citadel needs capital to cover positions, who do you think they’re going to collect it from? They’ve already liquidated accounts in both the stock and crypto markets. Up next, the hedge funds they manage.

Peter Hillerberg Ortex AMC short squeeze

“The sharp price increase can cause short position holders to try to close their positions by buying back the shares, causing additional demand which in turn can cause the share price to go up further.”

Peter hillerberg, co founder of ortex

AMC Entertainment defies Wall Street analyst predictions

AMC Entertainment’s stock is up 1,100% since January. A Wall Street analyst by the name of Rich Greenfield predicted AMC’s stock price would come down to $0.01 back in March. AMC is currently trading at $49.96 and TA (technical analysis) charts displaying healthy bullish movement with consolidation at the moment.

The Wall Street analyst was last seen blocking members of the AMC community online via. Twitter after the humiliating prediction . He has since made his profile on Twitter private.

Retail investors now own 80% of AMC Entertainment

Approximately 3.2 million retail investors currently own AMC Entertainment stock. AMC Entertainment is the most traded stock in the market at the moment. New retail investors want a piece of the action.

While older members of the AMC community, known as apes, have gained massive profits recently, they continue to hold their positions.

As more retail investors discover that AMC has the perfect set up for a MOASS (mother of all short squeezes), hedge funds will subsequently lose several more billions of dollars in the coming weeks to come.

New retail investors buying the stock will have a lot to catch up on. However, it won’t be very difficult. AMC’s community is very unified and you can find help from individuals at any given time as well as DD (due diligence) from yours truly, FrankNez, Trey’s Trades, Roensch Capital, and ReviewDork to name a few.

AMC’s market cap: $426M to $25.6B

AMC Entertainment market cap

AMC Entertainment’s market cap has grown immensely since the start of 2020 up until now. The companies market value has skyrocketed from $426 million to $25.6 billion dollars. The truth is people want to keep the movie theater business alive.

Retail investors are sticking it to the man who celebrated the economy collapse of 2008. All while taking the opportunity to make a life changing trade as AMC Entertainment boils for a short squeeze.

This AMC movement is more than just about making money now. It’s about the power of unification, and the strength to fight corruption in our nation.

Read: How do hedge funds manipulate the stock market

A share recount threatens all short sellers

An AMC recount is a detailed investigation into who owns AMC Entertainment stock. An AMC share recount will also expose how many illegal synthetic shares have been generated from naked shorting. This process could last up to a month.

This process coming from a companies upper management could lead the SEC to take more serious action. A margin call would force hedge funds and short sellers to close their positions resulting in astronomical loses. For the retail investor holding AMC? A short squeeze.

Read: Deputy Global Treasurer resigns from Citadel

Connect with me on social media

If we haven’t connected on Twitter, Facebook, or Instagram let’s take the opportunity to do so today! I’m active on all of my accounts and publish content regularly. You can find our exclusive Discord community on other related articles too. Here I engage my community one on one and discuss AMC’s price action

Read: AMC margin call: the squeeze is inevitable

You can support the blog on Patreon.

Twitter | Facebook | Instagram

BREAKING NEWS: Charles Schwab raises margin requirements on short sellers shorting both AMC and GME stock


Hedging Against America: The Mudrick Short Report

Mudrick Capital AMC

Written by: Laura Stine

“Be unafraid to criticize those who reach for the lowest common denominator, and who sometimes succeed in finding it.” – Christopher Hitchens, Letters to a Young Contrarian

Contrarian Investing

In the world of finance contrarians play a unique role, tempering speculation and exuberance with skepticism and doubt. Contrarian investing styles are often associated with hedge funds – privately managed investment vehicles that pool large amounts of capital and utilize complex, deep value trading instruments like short sales, derivatives, futures contracts and private equity to generate wealth for their clients.

Whereas most investors purchase securities in hope they rise in value, contrarian hedge funds more often try to capture profit from securities as they decline.

What is a short position?

The funds assume a “short” position by borrowing shares of a specific security they believe is overvalued and then selling those shares into the market with an obligation to repurchase and return them (referred to as “covering”) at some point in the future.

Hedge funds sometimes work together to short exorbitant amounts of shares of a single company, driving the stock’s value so low they force the company into bankruptcy. If this proves successful the shares of the bankrupt company become worthless and the fund does not have to return them to the lender, thus booking 100% gains on the transaction.

While a short position could technically remain open indefinitely, borrowers pay fees and interest on the loaned shares that can erode profitability, so there remains incentive to cover even as a stock continues to decline.

If the shares are repurchased at a lower price the fund profits off the difference in the spread. Conversely, if the stock rises in value the trade can result in exponentially larger losses, as the value of a security can theoretically rise indefinitely.

Smart money

These high-risk investment strategies are generally utilized by hedge fund managers and professional investors, the so called “smart money” as they like to call themselves. Contrarian hedge funds also profiteer off “distressed debt” investing, generating significant returns from restructuring the debt loads of bankrupt and financially struggling companies.

Intro to corporate bonds

The most straightforward form of distressed debt investing is to directly purchase corporate debt through the bond market often at steep discounts to face value due to the high probability of default.

This strategy presumes either the bonds will increase in value if the distressed company recovers, or the bond holders will receive preferential claims to the corporation’s equity in bankruptcy court and will be able to recover all or most of their investment.

Hedge funds can also gain exposure to distressed debt by extending credit directly to a floundering entity, or by purchasing convertible notes that can be redeemed for a specified number of shares of common stock at some point in the future.

What is a direct lending agreement?

Direct lending agreements may also grant hedge funds access to governance boards and corporate officers to help them navigate the recovery, bankruptcy, or restructuring process.

Who is Jason Mudrick?

who is jason mudrick

With a passion for contrarian investing, Jason Mudrick is a distressed debt specialist and founder of Mudrick Capital Management, a successful hedge fund with a reported $3.8 billion worth of assets under management.

After receiving a graduate degree from Harvard Law School, Jason cut his teeth on Wall Street during the dot-com crisis. He started his career at Merrill Lynch in the Mergers and Acquisitions department and then joined the firm Contrarian Capital Management in 2001 the day that Enron filed for bankruptcy.

Mudrick Capital Management

Jason left Contrarian in 2008 after Lehman Bros. filed for bankruptcy, forming Mudrick Capital Management to capitalize off the explosion of distressed debt during the great financial crisis.

During the course of his career the value of assets managed by hedge funds worldwide ballooned from about $200 billion in 2000 to over $3.8 trillion in 2020.

In a SALT podcast interview recorded in July 2020, Jason described witnessing the institutionalization of the industry as “a great time to be in the business.”

Mudrick made a name for himself in 2017 after joining investing legend Carl Icahn in making a notoriously contrarian bet against America’s brick-and-mortar shopping malls by shorting the CMBX.6 index and other distressed commercial real estate securities.

As shopping malls continued to lose market share to e-commerce giants, this proved be a highly profitable trade.

At the time opportunities in the distressed debt market were still limited as a recovering economy, low interest rates and a strong bull market had helped shore up corporate balance sheets. Corporations were also taking advantage of the cheap debt to grow their underlying businesses, and when COVID emerged during the beginning of 2020 many of these companies were severely overleveraged.

Opportunity knocks

To a contrarian like Jason Mudrick, events like the COVID lockdowns present once in a lifetime investing opportunities. As pandemic fear spread across the globe, Mudrick wasted no time in scouting for potentially distressed targets as well as capitalizing off his existing investments, one of which happened to be a gold mine in northern Nevada.

Mudrick had purchased the Hycroft Gold Mine out of bankruptcy in 2015 and in the SALT podcast described the investment as “dead money for a long time – and then Covid happened.

Foreseeing a spike in gold prices brought on by pandemic driven panic, Mudrick decided it was an opportune time to take Hycroft public. To further this end, Mudrick Capital just so happened to have on the books a blank check SPAC (special purpose acquisition corporation) that had gone public in 2018 under the ticker symbol MUDS with a stipulation that it must merge with a debt distressed target within 24-months or return the funds to investors.

MUDS stock

In January 2020 – with the MUDS merger deadline just three weeks away – Mudrick’s SPAC announced it would be taking it’s very own Hycroft Gold Mine public, instantly enhancing the liquidity and worth of the two dormant holdings.

In discussing Hycroft’s merger in the podcast, Jason astutely notes: “investors in SPACs tend to not care about the companies that are merging.”

The deal was finalized in May 2020 and Hycroft shares began trading in June at just under $10. Jason claimed to be bullish on the mine during the podcast, stating “if we traded close to comps, it would be a $20-$30 stock” yet admitted the security was “very illiquid.”

MUDS Stock

Shares briefly spiked up to $16 after the merger and were trading around $10 before Hycroft announced an additional 8.3 million share capital raise that diluted the price by 16%. Hycroft’s share price continued to bleed throughout 2021 and was last trading in the $3 range, down 80% from their peak, as investors begin to question when and if the mine will ever turn a profit.

Despite what came to be for early investors in MUDS, the shotgun marriage between two of Mudrick’s biggest duds was certainly a win for the firm at the time.

Owning companies through loans

With new liquidity available from that and the small short continuing to be a profitable trade, Mudrick began looking for pandemic-related distressed
opportunities outside of his own firm.

On April 1, Bloomberg’s Bankruptcy Law reported that he had compiled a list of 100 “beaten-down distressed-debt targets” that the firm was eyeing up.

Bloomberg’s reporter noted, “His playbook is the same as always: buy up debt in the hope of taking control as the business fails to make debt payments and is forced to restructure its balance sheet. Mudrick, whose distressed-credit hedge fund returned 22% in 2019, said he hopes to make as many as 10 new investments in the coming weeks. ‘We want to own these businesses through the loans,’ he said. ‘If the market recovers, we’ll make some money and move on.’”

Jason went into much greater detail about this playbook during his SALT interview, discussing at length how the highly complex process works.

Ultimately the funds seek to take a controlling share of the company through debtor in possession loans and by taking advantage of loose covenants in restructuring agreements. “It is a very resource intense investment strategy…it’s very advantageous to get to 51% in a lot of these documents, which are very covenant lite…there is an optimal size where you have the resources, you can own enough of this stuff to drive the boat.”

It’s part of the playbook

In other words, Mudrick’s aim is to acquire a controlling stake in the company through loans, as opposed to owning a majority stake of the company’s stock.

In fact, diluting and depreciating the value of the stock is part of the playbook. Then they lead the company though bankruptcy proceedings, which can take years, and flip the company at the end of the process for an enormous profit. Jason also discusses the usefulness of SPACs in the relisting process on account of the regulatory hurdles facing initial public offerings (IPOs) since the great financial crisis.

“It’s hard to just re-list that company, which is what we used to do in ’01, ’08. You would take the company through bankruptcy, and just re-list it on the New York Stock Exchange. And liquidity would come back to the name, and you would exit. Today, the holding period is much longer.”

Mudrick and AMC Entertainment

One of the top targets on Mudrick’s list was AMC Entertainment Holdings Inc., a 100-year old business that had recently expanded to become the largest theatre company in the world. At the time AMC was controlled by Wanda Group, a Chinese conglomerate that had assumed a majority stake in the company prior to taking it public through an IPO in 2013.

Mudrick AMC

In the years preceding the COVID lockdowns AMC was one of those businesses taking advantage of low interest loans and was rapidly expanding its operations, acquiring theatres throughout the globe. When lockdowns shuttered the entire industry overnight, debt heavy AMC started bleeding cash at an unsustainable pace. From Mudrick’s perspective is was an ideal candidate for a loan-to-own acquisition.

The playbook hedge funds use to drive companies into bankruptcy is relatively uniform and it almost always begins with capital infusions through high interest loans. In bankruptcy court debt holders always get paid before equity holders, so while investors in the stock of a struggling company may assume a total loss in the event of bankruptcy, lenders will most often recover their losses in equity.

Hedge funds usually position themselves to gain from the deal either way (hence the term hedge) by adding convertibility features to their notes so the fund can convert the debt into common stock in the event the business recovers.

The death spiral

But convertibility features can also be used to leverage a company into bankruptcy through a phenomenon called “death spiral financing” whereby lenders exercising share conversions drive down the price of the security through the dilution, then sell their stake, further exacerbating the price decline.

This value depreciation attracts short sellers who add even more selling pressure, causing long-term investors to cut their losses, and even further compounding the problem.

The hedge fund then steps in and offers more convertible loans, repeating the cycle until a company’s stock is rendered worthless. Investopedia.com makes a point to highlight that pretty much the only reason a company would issue convertible bonds is if they are in desperate need of cash to stay afloat.

“The only hope for the company to interrupt the death spiral is to improve its operational results. If it can effectively invest the proceeds of the convertible bond issue in its underlying business, it may be able to thwart the short sellers and even stick them with the losses.”

AMC Entertainment’s, Adam Aron

Adam Aron Mudrick

AMC’s CEO Adam Aron had taken the job in 2015 and enjoyed a few years of acquisitions and growth before the theatre business fell victim to the same slump as America’s shopping malls. Under Adam’s leadership AMC’s share price rose to a high of $35 in 2017 before taking a nosedive and closing the year down over 50%.

Bearish sentiment simultaneously took hold among analysts covering the entertainment industry, forecasting falling demand for the theatre experience as viewers opted for stay-at-home streaming services, and further discouraging new investors.

In January 2020 before COVID hit, AMC shares were trading in the $7 range and by the time the lockdowns took hold, shares had fallen to just $2, off 95% from previous highs. As the lockdowns stretched on Adam Aron was in a seemingly impossible bind: he was running out of cash and he was already leveraged to the gills, having already borrowed hundreds of millions of dollars from numerous stakeholders just to survive.

Adam meets Mudrick Capital

At the end of 2020 when Mudrick Capital approached Adam with a lifeline, he took it, borrowing $100 million in cash and entering into a complex debt restructuring agreement with the fund, ultimately refinancing $2.6 billion worth of AMC’s liabilities and providing enough liquidity for AMC to survive through 2021. Once the deal with Mudrick was made public, Adam Aron turned to AMC investors to assure them the bills would be paid and that a bankruptcy filing was, at least temporarily, off the table.

While presumably this all sounded good to shareholders, the unintended consequence of the debt restructuring was a credit downgrade by S&P Global and an onslaught of fear inducing headlines suggesting that AMC would never dig themselves out of the hole. As COVID spiked demand for in-home entertainment, the national narrative suggested that the 100-year old tradition of movie going may never be revived.

Mudrick backstabs AMC Entertainment

Adam did a share offering to raise capital, adding $125 million to the balance sheet in two months, but further diluting the share price. Then he was forced to borrow another $100 million from Mudrick, who exercised the conversion on the firm’s initial investment, granting the fund 13.7 million common shares of AMC that Mudrick turned around and sold.

At this point AMC’s finances were deeply entrenched in the gallows of the death spiral. Most CEO’s would have buckled under this kind of immense pressure, but Adam beat back. Certainly one motivating factor was to protect his own substantial investment in AMC stock that had been provided to him as part of his annual salary.

Until the theatres reopened and AMC could earn revenue there was nothing he could do but keep kicking the bankruptcy can down the road. Another 178 million AMC shares were sold off, this time raising $500 million as the share price crept lower and lower.

Share prices dipped below $2 as short sellers crowded into the trade and analysts continued to attack the company. And just when it looked like the hedge funds had won, an unforeseen group of investors showed up and disrupted the entire plan.

Jason Mudrick AMC

Short selling

Short sellers have a major incentive to exit a trade early if it begins to go the wrong direction, as losses can be orders of magnitude larger than limited gains should the stock price suddenly go up. It is considered a very high risk investing strategy, and to limit loss exposure the brokerage firms handling these trades require traders to maintain cash collateral and lines of credit (more leverage) in a margin account, the amount varying depending on the fundamentals of the trade and the perceived risk to the brokerage.

When cash reserves fall short the accountholder receives a “margin call” requiring a deposit to meet the maintenance levels. If the accountholder cannot deliver the cash by the specified time the account can be subject to liquidation and realized losses can be significant.

Short trades in effect occur backwards – sell high, buy low being the winning strategy – and the shares must be purchased to close out the position. Should something unexpected cause a stock’s price to rise sharply, shorts will rush to exit the trade, further accelerating the price increase.

Short squeeze

AMC short squeeze

This triggers margin calls, which if left unmet trigger liquidations. Liquidations trigger more price volatility, as brokerages may close out both short and long positions to satisfy margin requirements, creating volatility throughout the whole market.

This effect is magnified considerably in securities with a high percentage of short interest and can culminate in a “short squeeze,” where a stock price soars to absurdly high levels for a matter of days before crashing back down again once short positions have all been covered.

Just as the potential demise of shopping malls and movie theatres presented opportunities to hedge funds, the possibility of initiating short squeezes presented opportunities to a very small group of investors participating in an online discussion forum on Reddit.

While screening struggling stocks for potential investments, the group noticed some unusual trading activity in a handful of heavily shorted holdings – most notably mall retailer GameStop – and also AMC Entertainment.

Reddit retail investors make a move

Speculation began to form around GameStop in particular, that large hedge funds had borrowed and sold short more shares than were available in the float (the sum of all shares in circulation) causing the price to be artificially depressed.

Reddit retail investors GameStop AMC

In theory this should not be possible as short sellers are not supposed to sell shares without legally borrowing them first, but every day unknown numbers of fraudulent shares, referred to as “naked shorts,” are sold into the markets in poorly regulated, illicit transactions between brokerage firms, market makers and clearing houses.

The beginning of the beginning

To Main Street traders GameStop had all the makings of a darling underdog, including relatively good fundamentals to support the underlying business. Plenty of Americans still enjoy the instant gratification of the brick-and-mortar shopping experience, and GameStop in particular had nurtured a generation of brand loyal gamers that (perhaps not coincidentally) have also embraced the emergence
of online stock and cryptocurrency trading platforms.

They genuinely liked the company and saw potential for it to thrive in a post-pandemic the future. Many of these investors had been adversely impacted by the great financial crisis of 2008 and they despised the thought of greedy hedge funds leveraging their favorite businesses into bankruptcy.

As time passed a promising thesis formed around the GameStop trade and they started buying up the stock. Others joined in, and slowly GameStop’s share price began to rise.

A movement is sparked

AMC quickly got swept up in the excitement and as more and more people started buying the stock it started rising too, putting short sellers (who had been patiently waiting for the bankruptcy proceedings to commence) on high alert. But they did not cover their positions. Adam Aron meanwhile took advantage of the stock’s valuation by issuing even more shares and was able to restructure AMC’s debt with better terms.

In a press release to investors dated January 25, he announced: “Today, the sun is shining on AMC. After securing more than $1 billion of cash between April and November of 2020, through equity and debt raises along with a modest amount of asset sales, we are proud to announce today that over the past six weeks AMC has raised an additional $917 million capital infusion to bolster and solidify our liquidity and financial position. This means that any talk of an imminent bankruptcy for AMC is completely off the table.”

Robinhood sparks outrage

At the end of January GameStop investors finally succeeded in initiating a short squeeze, causing shares to jump from their yearly low below $4 to a peak of $483 – a whopping 12,811% gain – and AMC enjoyed a nice bump up into the $20 range at the same time.

Both stocks appeared positioned to rise even higher the next day when suddenly Robinhood and a number of other online brokerage firms halted the buy side of the trade in these securities because they lacked the liquidity (and possibly the desire) to settle the transactions.

Share prices plummeted on the news and many retail investors found themselves on the wrong side of the trade with significant losses, otherwise known as “holding the bag.” The move was perceived by retail traders and market observers to be a significant screwing by the brokerages, hedge funds, market makers, and regulatory agencies alike.

Read: Why new retail investors holding AMC stock should avoid Robinhood

Planet of the apes

It was around this sense of injustice that a much larger community of investors began to form, along with hope that those holding shares with large paper losses could potentially recover them in time. They did a lot of research and due diligence, concluding that most of the shorts had not covered their positions, but had increased them instead.

They began to unearth a treasure trove of instances of market manipulation, collusion and illegal trading activity, all while they were being mocked by the press and frowned upon by Wall Street pundits.

It became clear that the institutionalization of hedge funds over the past two decades had allowed these entities to further their own self-interests at the expense of not just retail traders, but pension funds, corporations, communities, and working-class people throughout the country.

Examples of such activity were too many to count. When the dust settled after the thwarted squeeze, Bloomberg reported that Mudrick capital had booked over $200 million in gains from debt and derivative holdings in AMC, including $50 million from the sale of out-of-the-money $40 call options on AMC and some additional call options on GameStop.

What are out-of-the money calls?

Out-of-the-money calls are risky bets where the buyer pays a premium for the right to purchase shares of a security on a future date at a set price (the strike) above where the stock is currently trading. If on that date the share price exceeds the strike price on the call, the purchaser can cash out and collect the shares or sell the contract and bank the profits.

The $40 calls that Mudrick was selling presumably seemed like a safe bet to capitalize off the volatility, as even in the best of times AMC stock had never reached such lofty valuations.

Mudrick and naked calls

It was also reported by Bloomberg News Network that prior to the price jump Mudrick had already sold the 21.7 million AMC common shares the firm had acquired through the debt restructuring (8 million from the initial deal, followed by another 13.7 million shares from the second convertible bond) at $3-4. By selling those shares into weakness, Mudrick missed out on the potential for 1000% gains in those shares in the run up from $2 to $20.

This also meant the options Mudrick sold were “naked calls,” meaning the seller does not own the shares of the underlying security and if they exercised he would have to repurchase those shares at significantly higher prices (unlike naked shorts, naked calls are perfectly legal, albeit extremely risky). Mudrick obviously did not think they would exercise, or he would never have sold $50 million worth of them.

Despite the reports that Mudrick had cashed out the fund’s AMC shares near all-time lows and placed a large bearish bet against the stock price rising in the future, financial news outlets were quick to admire his profits and quoted him as saying: “The market did not believe AMC would be able to get through the downturn – we did.”

A new force to be reckoned with

Ironically, Mudrick may very well have saved AMC from bankruptcy, but it was retail traders who would go on to save AMC from him. In the weeks and months that followed, enthusiasm for GameStop and AMC spread across social media and investors in these stocks became a force to be reckoned with.

They rebranded themselves as neither bulls nor bears, but “apes” and spammed the internet with video clips, charts, news and humorous memes regarding their two favorite holdings. By the end of May both stocks were on the move again, and AMC especially was on a tear.

Apes had spent the month renting billboards, flying banners behind airplanes and building connections that spanned the depths of race, politics, nationality and economic status to rally around a common goal. For some of the apes, sharing their love for AMC and GameStop while exposing the inner workings of a corrupt financial market had become a full-time job.

Mudrick continues to stab retail investors

And with this backdrop in mind, Mudrick was fixing to lose a lot of money on those $40 calls he had sold back in January. The last day of trading in May was the Friday before Memorial Day weekend, and AMC shares had climbed all the way to $36.72 during intraday trading and then fell dramatically to close at $26.12, still up over 200% for the week.

The apes were on fire, and while they were celebrating the holiday with their families, Mudrick spent the weekend negotiating the purchase of another 8.5 million AMC shares from Adam Aron, who was quietly arranging an additional 11.5 million share offering for the following week in his quest to shore up AMC’s finances.

Mudrick agreed to purchase the 8.5 million shares over the weekend for $27.12 each, a dollar premium above Friday’s closing price, adding another $230.5 million to AMC’s balance sheet. When the market opened on June 1 following the three-day weekend, Mudrick sold all 8.5 million shares before news of the deal even broke, instantly netting a few million dollars in cash for the firm and temporarily stalling the morning price rally.

Bloomberg

Most investors learned about the transaction from a widely circulated Bloomberg article that claimed Mudrick had sold the shares because they were “overvalued.” AMC also released a statement about the deal that contained a similar warning to investors regarding the stock’s valuation. Regarding the highly unusual nature of the move, Bloomberg’s reporters noted:

“Raising cash through an equity sale to a single holder is relatively rare in U.S. markets. Having the holder flip the stock right after buying it is almost unheard of – usually the buyer is an existing stakeholder trying to send a message of stability to the market.”

bloomberg mudrick

About the only logical explanation is that Mudrick was desperately trying to keep AMC’s share price below the $40 strike on his outstanding calls (also known as market manipulation).

Market manipulation goes unnoticed

Nonetheless the message of instability was totally ignored. AMC’s share price dipped briefly on the news midday and then soared up another 23% to close at $32.04.

Given an 8.5 million share dilution was met by such a steep rise in price (when the exact opposite should have happened) this would have been the best time for Mudrick to exit the trade, albeit at a very significant loss.

Mudrick instead kept the calls overnight, perhaps hoping AMC’s upcoming share offering would drive the price down later in the week, but that did not happen. The following day the stock blew past $40 in a matter of hours, triggering a gamma squeeze that sent the share price soaring over 100% in one trading session.

Mudrick reportedly closed out the firm’s entire position in AMC that day of both debt and derivative holdings which further accelerated the upward price movement.

Mudrick loses hundreds of millions

Over a week later the Wall Street Journal reported that his flagship $3.8 billion fund had shed 10% as AMC’s soaring stock price cratered their “complex trading strategy” and Mudrick had lost hundreds of millions of dollars betting against AMC.

WSJ reporters described Mudrick Capital as “the latest hedge fund to fall victim to swarming day traders,” as though a contrarian who managed to lose that much money betting against a business he claimed to believe in was a victim of anything short of his own foolish agenda.

Apes united

AMC Community

Over 4 million individual investors from around the globe now own shares in AMC, controlling more than 80% of the stock’s total float. There are still unknown numbers of naked and synthetic shares in circulation, unknown numbers of shares traded back and forth between high frequency algorithms, and massive amounts of shares trading hands in off-shore exchanges, literally called “dark pools.”

There remains a huge volume of open short interest in both AMC and GameStop, with short sellers down billions of dollars on their positions. For months now the media has been trying to foster a narrative to squash the momentum, and none of it seems to be working. The apes are still buying and holding, and the shorts are still digging their holes even deeper.

There are not a lot of rules in the game, and few people around to enforce them. But thankfully in dealing with people like Mudrick: there’s always karma.


Thank you Laura

From Frank Nez

Franknez.com

Laura Stine is an off-the-grid retail investor who has been involved in numerous projects in efforts to fight corruption. She makes time to write when injustice demands it and has long been an advocate in Alaska against sled dog abuse and government corruption.

I want to personally thank Laura for this amazing publication. This article will be archived in what seems to be a historic moment in time.

Laura Stine Franknez.com

Laura will be writing for Franknez.com from time to time. You will know if an article is written by Laura because the publication will say it was written by her and it will contain her image.

No, I am not letting my foot off the gas pedal. I figured this is a great way to provide even more value to the community. Be sure to share this article and welcome Laura in the comment section below! You can follow Laura on Twitter here. 🤝✨


Twitter | Facebook | Instagram | Patreon


« Older posts

© 2021 Franknez.com

Theme by Anders NorenUp ↑

%d bloggers like this: