AMC Entertainment, the largest movie theatre chain in the world, continues to innovate and creatively raise cash with a mission to erase its debt accumulated during the pandemic.
Hedge Funds Face Big Risks
Ihor Dusaniwsky, head of predictive analytics at financial technology and analytics firm S3 Partners, compiled a list of those most vulnerable stocks, headed by such names as AMC (AMC), GameStop Inc. (GME), Coinbase Global Inc. (COIN) and CarMax Inc. (KMX).
“One factor that is also killing profits for short sellers is the borrowing costs on stocks that no one is willing to part with, and the stock that figures highest on that list is AMC.”
AMC’s cost to borrow recently skyrocketed to more than 1,000% with its cost to borrow average currently being reported at 928%.
“Short sellers want to short the stock, but they are not able to get a stock borrow locate and therefore cannot execute their short on the street,” Dusaniwsky told MarketWatch in an interview.
“But, when any stock borrows become available — lenders, brokers know they can charge inflated fees as there is huge demand for the name.”
“In this case there is an AMC–[preferred stock] APE arbitrage trade that will be profitable if the conversion occurs soon because the high financing costs are eating into those expected profits every day, including weekends,” Dusaniwsky said.
But the S3 analyst isn’t the only one stating there is big squeeze potential in AMC and GameStop.
Strategist Says Mother of All Short Squeezes is Here
Interactive Brokers Chief Strategist Steve Sosnick says there’s big demand to short AMC Entertainment stock.
He says the biggest reason aside from the company’s fundamentals is its new merge with its equity (NYSE:APE).
“It’s very hard to keep the momentum in these things because economic reality does take hold.
Bed Bath & Beyond, at one point was the best performing stock on the board until reality set in and they began defaulting, averted bankruptcy, but using a deal that is so dilutive that it’s unavoidable.”
Sosnick says AMC is in a very special situation because of the proposal to merge APE with AMC common shares.
“Right now we’re seeing such a demand to short AMC partly because of its difficulties but partly because of the special situation.
Shares of Bed Bath & Beyond (NASDAQ:BBBY) were: down -5.04% in the past trading week.
On social media, shareholders of the so called ‘meme stock’ continue to buy the stock despite talks of bankruptcy.
The company edged closer to a bankruptcy filing in late January after the retailer said it had received a default notice from JPMorgan Chase & Co., its loan agent, and warned it didn’t have enough funds to make payments.
Creditors are demanding immediate repayment of the company’s debt after it breached the terms of a credit line, according to a regulatory filing Thursday, per Bloomberg.
“Generally, in situations like this where a company defaults on their loan agreement our experience is, if they don’t come to an agreement with their lenders, the likelihood of a bankruptcy filing within the next 30 days is relatively high,” said Dennis Cantalupo, chief executive officer of Pulse Ratings, a credit-rating and consulting firm.
BBBY stock is up +1.73% this year-to-date.
#5. Hycroft Mining Holding Corporation
Shares of Hycroft Mining (NASDAQ:HYMC): rose +0.86% in the past week.
The mining company’s stock is down more than -28% this year-to-date.
Shares rose to $0.57 from a previous low of $0.44.
AMC CEO Adam Aron made the exciting announcement on Twitter stating, “so far ALL 20 of the newly drilled bores contained gold/silver, and 14 of the 20 showed higher grades than previously known to Hycroft.
AMC acquired a 22% stake in the silver and gold mining company in 2022 when they received 23.4 million warrants in Hycroft at $1.07 per share.
The stock at the time surged to $1.70 after trading at $0.60 earlier that same year.
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Cohen and his team scooped up 606,000 shares of the video-game retailer, a stake worth $11 million as of December 31.
In 2021, the New York Mets owner deactivated his Twitter account after receiving several threats from users during the ‘meme stock’ rally.
“I’ve really enjoyed the back and forth with Mets fans on Twitter which was unfortunately overtaken this week by misinformation unrelated to the Mets that led to our family getting personal threats,” Cohen said in a statement.
Cohen’s hedge fund, which managed nearly $19 billion in assets at the time, lost nearly 15% after retail investors caused shares of videogame retailer GameStop to surge in 2021.
The losses at Point72 are mainly due to the company’s investment in hedge fund Melvin Capital, which bet against GameStop and had to receive nearly $3 billion in emergency cash from two outside investors, one of which was Point72.