Market News Daily – The White House Vows to Monitor Illegal Short Selling.
The White House has vowed to monitor illegal short selling activity after bank stocks have taken a massive plunge.
Shares of PacWest Bancorp (NASDAQ:PACW) fell more than -50% on Thursday and are down more than -70% in the past week alone.
Volume surged to 106.9 million, six times its average trading volume of only 17 million.
(Reuters) U.S. federal and state officials are assessing the possibility of “market manipulation” behind big moves in banking share prices in recent days, a source familiar with the matter said on Thursday, as the White House vowed to monitor “short-selling pressures on healthy banks.”
Shares of regional banks continued to fall this week after the collapse of First Republic Bank, the third U.S. mid-sized lender to fail in two months.
Short sellers made $378.9 million in paper profits on Thursday alone from betting against certain regional banks, according to Ortex.
Increased short-selling activity and volatility in shares have drawn increasing scrutiny by federal and state officials and regulators in recent days, given strong fundamentals in the sector and sufficient capital levels, said the source, who was not authorized to speak publicly.
“State and federal regulators and officials are increasingly attentive to the possibility of market manipulation regarding banking equities,” the source said.
White House press secretary Karine Jean-Pierre said the Biden administration was closely watching on the situation.
Temporary Short Selling Ban
“This volatility is being fueled by emotion and misinformation that does not reflect the strong underlying fundamentals of our banks,” Johnson said in a statement.
“These institutions remain resilient and well-capitalized, and Americans can rest assured their deposits are safe.”
The S&P 600 bank index dropped over 3% on Thursday.
PacWest Bancorp shares tumbled over 50% after it confirmed it was exploring strategic options.
Western Alliance Bancorp denied a report from the Financial Times that said it was exploring a potential sale, and said it was exploring legal options.
Its shares plummeted more than 38%, with trading in the stock halted multiple times.
The increased short-selling activity has triggered some calls for a temporary ban, but an SEC official told Reuters on Wednesday the agency was “not currently contemplating” such a move.
The SEC first warned investors in March, during a previous period of high market volatility surrounding the collapse of Silicon Valley Bank and Signature Bank, that it was carefully monitoring market stability and would prosecute any form of misconduct.
Market News: Short seller losses amount to $81 billion this year as stock market rallies.
Short sellers feel the pain in the stock market’s 2023 rally, says the Wall Street Journal.
The market’s comeback in 2023 has been difficult news for one group of investors: short sellers.
Short sellers profit from the declines in the market, which we saw much of in 2022.
However, the stock market has been performing surprisingly well this year despite talks of a looming recession.
The Wall Street Journal reports that short sellers are down $81 billion this year alone as the markets begin to bounce back.
“Short sellers who have incurred hefty losses are actively trimming their positions”, said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.
“Investors betting against stocks have racked up $81 billion of mark-to-market losses on short positions this month through Thursday after accumulating $300 billion in gains in 2022”, Mr. Dusaniwsky said.
Experts are expecting heavily shorted stocks to squeeze as more short sellers begin to close their positions.
Is short squeeze season here?
Are stocks about to squeeze? Short seller losses in 2023.
Investors and analysts say the rally appears to be driven by a few things.
Signs that inflation is cooling have stoked bets among investors that the Federal Reserve will pivot from raising interest rates to cutting them as soon as the second half of the year.
That has helped risky assets across the board rise.
Especially risky corners of the market, such as stocks with high short interest, have rallied even more.
Analysts say that has likely forced short sellers to close out bearish positions to cut their losses — resulting in what is known on Wall Street as a short squeeze.
Retail favorites such as AMC stock, MULN, and others seem to have bottomed out earlier this year.
“We’re seeing a mirror image of the performance within the equity market. The worst performers last year have been leading this year,” said David Lefkowitz, head of Americas equities at UBS Global Wealth Management. “It does look like some re-risking and short covering.”
“A lot of these stocks rallying were highly shorted, long duration names with earnings way out in the future. With a significant decline in the discount rate, those earnings are now worth more,” said Sameer Bhasin, principal at Value Point Capital, a New York-based family office.
When will shorts close their positions in AMC? When will shorts cover AMC?
Every retail investor holding a position in AMC wants to know, when will shorts close their positions?
And I don’t blame you.
This one is a little tricky.
See, it’s like saying, “when will retail investors sell their positions?”
Welcome to Franknez.com – the blog that fights for you, the retail investor. Today I want to discuss shorts closing.
Let’s get started!
Retail investors have been waiting patiently for AMC Entertainment stock to rip.
You’ve been holding through the ups and downs and even buying the dips.
And although we did see AMC’s share price surge in 2021, the short sellers are still here in 2023.
So, why aren’t shorts closing their positions yet?
What do retail investors need to do to squeeze hedge funds out of their money?
Let’s discuss it.
Are shorts obligated to close their positions?
When do shorts have to close their positions in AMC?
Let’s start with the fundamental question.
Are shorts obligated to close their positions?
Now, there are currently no rules regarding how long a short can hold before closing out their position.
However, lenders do have the right to demand the seller closes their position with minimal notice.
This is rare and only occurs if the the seller isn’t paying the interest fee, or the interest fee is ridiculously high.
“A short position may be maintained as long as the investor is able to honor the margin requirements and pay the required interest and the broker lending the shares allows them to be borrowed.” – Investopedia
When an interest fee is extremely high, it makes a stock difficult to borrow which obligates the short seller to close their positions.
Short sellers are burning big money to keep these positions open in 2023 though.
You’ll want to keep an eye on this interest as it will determine just how much shorts are bleeding.
I update AMC’s short interest data (and others) here daily.
Why does the “Cost to Borrow” fee matter?
The cost to borrow fee is an interest that short sellers must pay for borrowing AMC shares to short the company stock.
These fees are currently at an all-time high.
Short sellers will hold in hopes to drive AMC’s share price right back down to the floor.
However, AMC is trending upwards now and has absolutely no intention of going back down.
Analysts data and AI predictions all point towards a high possibility of a short squeeze.
Even Fintel’s short squeeze score has been as high as 80-90% in recent weeks.
This short borrow fee is going to continue to go up as AMC stock becomes harder to borrow.
For short sellers, a low short borrow fee is in their favor.
Hedge funds much rather pay the fee and stubbornly continue to hold their positions against retail investors.
But, if the short borrow fee is high enough to hurt the borrower, they will be more inclined to close their positions before losing an excruciating amount of money.
How can retail investors help drive the short borrow fee up?
Retail investors have helped drive the short borrow fee up simply by holding their positions.
When AMC squeezes, not every short will close their positions immediately.
This means retail investors won’t ever be able to time the high.
There will be short sellers who will continue to short even as share prices rise.
If we begin to see AMC’s price action rise monumentally, it is important to have a plan on how to take profits.
Just like a day trade, investors may be profitable for some time until they see gains turn into losses, which usually occurs due to greed in the markets.
This is what you want to avoid.
Important advisory: I am not a licensed financial advisory. I simply have a passion for finance and writing.
What happens when a short close their position?
A short position will be profitable if it is closed at a lower price than the initial transaction; it is at a loss if it is closed at a higher price.
In AMC’s case, shorts who drove began to short around $5 but are still holding to-date are at a loss.
AMC is currently trading around $6.08 per share as of 2/2.
When there’s a ton of shorts closing (in a particular stock), it will result in a short squeeze.
What is a short squeeze?
A short squeeze occurs when a stock spikes in price action due to an increase of short-sellers closing out their positions.
We’ve seen a short squeeze happen with both GameStop and Volkswagen. GME topped almost $500 while Volkswagen spiked shy below $1,000 back in 2008.
Some short sellers closed in June of 2021 when AMC shares rose to $72 per share as well.
AMC’s price skyrockets to more than +3,000% that year!
Short squeezes are massively profitable for retail investors.
These phenomena are how people are able to accumulate wealth in such little time.
AMC said bankruptcy was no longer on the table years ago and some Wall Street analysts have said the industry is on a solid path to resurgence, via Hollywood Reporter.
In fact, the short thesis is beginning to change with many incredible developments happening in the movie theatre industry.
AMC Entertainment (NYSE:AMC) is up more than 54% this year-to-date and it looks like the stock has bottomed out.
As we continue to see a high utilization and the short borrow fee increase, we can only expect shorts may be incentivized to close sooner than later.
Will AMC’s price action continue to go up?
AMC stock has always had high demand from shareholders.
While many of these retail activists continue to hold losses from June’s drop, it’s possible this changes – granted that short sellers close out their positions this year.
Short sellers will have the option to hold their loses on paper for months to come (with fees) or close their position at the current share prices.
Short selling is a risky business and bulls have sent a message – “we’re not leaving”.
With new titles coming to AMC movie theaters as well as new developments, we’re only going to continue to see a surge in price action due to an increase in the company’s fundamental growth.
Even if shorts continue to hold, lenders will eventually run up the interest rate again, forcing them to throw in the towel.
Leave a comment below and let the community know what a short squeeze would mean for you.
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Market News Today – When do shorts have to close their positions in AMC?
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Franknez.com is the media blog that keeps retail investors informed.
Market News: Here’s the latest on AMC’s Preferred Equity, APE.
Retail investors are angry at regulators for allowing Wall Street to decimate APE stock.
While AMC’s Preferred Equity (APE) was intended for the company to capitalize on, banks, institutions, and short sellers have abused shares to the ground.
The equity was meant to provide AMC Entertainment with liquidity in order to pay down their debt.
While AMC was able to reduce their debt by $106 million due to APE, shares have been shorted from $7 all the way down to $0.81.
Shareholders questioned how shorting APE was possible in the first place, failing to recognize that APE is a tradable security just like any other stock.
Faceless influencers within the AMC community led many retail investors to believe that shorting AMC’s Preferred Equity was impossible.
And unfortunately, this perception clouded many people from creating a proper investment strategy or embracing for what was to come.
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Retail Investors Seek to CEO for Answers
AMC and APE shareholders all have one common goal in mind, an AMC short squeeze and an APE short squeeze.
And although many shareholders have been transformed into paying customers, others are looking at AMC CEO Adam Aron for answers.
Loyalists don’t question the CEO and will condemn you for doing so, but if shareholders are still invested in the company, they have every right to yearn for answers.
Adam Aron has successfully maneuvered AMC out of bankruptcy, primarily thanks to its shareholders of course.
He’s utilized Twitter magnificently in a way that no other CEO has ever done so before.
And you can’t help but to admire the business personality in him that can raise cash out of thin air.
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.
👀@CEOAdam Thanks! I can say we all enjoyed! German apes: he will be in Germany around january or februari and probably in Berlin…. My favorite city…. will try to be there! pic.twitter.com/xysVCeyJIR
