Join the newsletter to become part of an activist group fighting for market transparency!
Receive weekly market news and articles like this to stay up to date.
AMC Issues Strong Short Squeeze Statement
I’ve touched topic on the warning AMC released for shareholders below as the company prepares to sell up to 425 million APE shares.
“Under the circumstances, we caution you against investing in our AMC Preferred Equity Units, unless you are prepared to incur the risk of losing all or a substantial portion of your investment,” said an official statement from AMC Entertainment.
However, the company also warns short sellers of a potential APE short squeeze, resulting in severe losses for those betting against the security.
“purchasers of our Class A common stock and AMC Preferred Equity Units could incur substantial losses if there are declines in market prices driven by a return to earlier valuations; to the extent volatility in our Class A common stock and AMC Preferred Equity Units is caused, or may from time to time be caused, as has widely been reported, by a “short squeeze” in which coordinated trading activity causes a spike in the market price of our Class A common stock and AMC Preferred Equity Units as traders with a short position make market purchases to avoid or to mitigate potential losses, investors purchase at inflated prices unrelated to our financial performance or prospects, and may thereafter suffer substantial losses as prices decline.”
In this passage here, AMC is warning both retail investors and short sellers alike of what a short squeeze could muster.
The losses for short sellers could be grand as coordinated trading activity causes a major spike in price.
For retail investors, buying the spike could cause significant losses as the stock enters a cooldown period.
What AMC is accepting though is the possibility of a short squeeze whether it be AMC or APE shares.
What Will Trigger a Short Squeeze?
According to AMC’s statement, a short squeeze is triggered by coordinated trading activity, resulting in share price spikes.
Volume was key in January when AMC surged to $20 per share, it was key when the stock skyrocketed to $72 per share in June, and it will be the key today.
The bear market is pinning stocks, but as the market reverses, it’s very possible we see a surge in trading activity in AMC (and APE) again like we did in 2021.
It’s the biggest news in the AMC community thus far.
So, why did APE shares rise so much today?
And where did so much trading volume come from?
Retail investors are speculating insider buying triggered the massive price surge and heavy volume.
Others are alleging it’s the company’s way of injecting value back into the equity before APE re-merges with AMC common stock.
The truth is, it’s hard to say.
APE was never intended to be a valuable asset for investors, but more so a valuable asset for AMC Entertainment as a company.
Will APE Shares Keep Rising?
If insiders are injecting the equity with value before shareholders vote for the merge of APE and AMC, then it’s very possible the equity may continue to rise.
As of right now, where the immense amount of volume came from is undetermined.
What’s certain is many shareholders weren’t too happy about the creation of APE in the first place as it created unnecessary loss for shareholders.
Here are the CEO’s comments published on Twitter:
“Also, APEs worked exactly as intended to let us raise needed cash, buy back debt, explore M&A. But a huge discount in APE market price vs common stock must be addressed. We’ll hold a shareholder vote. It’s time to convert APE preferred into AMC common to eliminate that discount.”
APE shares have been massively shorted to cents, AMC stock is now trading below $5, a solution has to be addressed.
And so it has.
Adam Aron is proposing a 1-for-10 reversal stock split where shareholders will get left with 1 share of AMC for every 10 shares they hold in exchange for a higher share price.
The idea is to give shareholders the illusion of a higher share price by reducing the number of shares they hold.
The value of an individual’s portfolio would remain the same amount.
However, if an investor holds 10 shares of AMC, they will convert to 1 share.
If an investor holds 100 shares of AMC, after a 1-for-10 reverse split they will hold 10 shares.
All for the sake of making the value of AMC shares appear much higher.
With AMC currently trading around $4.50, a 1-for-10 reverse stock split would mean the stock will then trade at $45 per share.
Leave your thoughts below
I’m curious to hear your thoughts on what’s currently occurring with AMC Entertainment and its APE shares.
How do you feel about the entire situation at hand?
Leave your thoughts below for the community to see.
Addressing shareholder concerns is important, whether you agree or not.
Does It Even Matter?
Some of you care about your money, your finances, your investments, and some of you simply don’t.
To some, being part of an embracing community, being known in a community, and embracing the movie theatre industry, but more specifically AMC Entertainment, is more important than monetary gains or financial abundance at this point.
And is that even a bad thing?
You just want to be heard; you want to fight evil in the markets without a care about money.
Or maybe you’re simply in the middle.
Let us know who you are – leave your story down in the comment section below.
I think it’s fair to assume insiders won’t be buying APE anytime soon as it’s primarily a tool to capitalize from its shareholders, rather than a long-term investment.
Is An APE Short Squeeze Possible?
Some AMC shareholders are convinced that APE’s high short interest mixed with large buying pressure will trigger an APE short squeeze or trigger major price action like we saw with AMC in June of 2021.
And hypothetically speaking, they’re not wrong.
But APE would need to get backed up by institutions with strong enough buying power to scare short sellers out of their positions.
Because despite retail’s efforts, capital is just being eaten up by dark pools, selloffs, and heavy shorting.
And unfortunately, Gary Gensler is nowhere in sight to level the playing field.