The cost for hedge funds to short AMC is rising.
Short sellers have been prophesizing the fall of the movie theatre industry after the pandemic temporarily crippled the largest movie theatre chain in the world, AMC Entertainment.
Overleveraged institutions, who many have discovered to be involved in major conflicts of interest, have been able to manipulate the company’s shares from rising through a variety of tools only accessible to financial institutions.
The demand for the movie theatre chain stock has been masked in dark pools, or other foreign exchanges; only a fraction of retail’s money has been observed on the lit exchange (NYSE).
Nonetheless, retail investors have become a massive support for the stock and the company.
So much that even as short sellers drag out getting squeezed from their positions, the cost for hedge funds to short AMC has risen.
Let’s go over the numbers.
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AMC’s CTB and short borrow interest fee increase
AMC’s cost to borrow (CTB) has steadily increased over the past weeks.
According to the reported short interest data provided by Ortex, AMC’s CTB is now at 17.78%.
Ortex’s cost to borrow represents the annualized % of interest on loans from brokers to their clients, i.e., hedge funds.
There are currently 196.09m AMC shares out on loan.
196m shares on loan X 17.78% (CTB) = $34.8 million in interest.
It’s costing short sellers $34.8 million per year to short AMC Entertainment.
This is the fee hedge funds are currently paying to bet against retail investors long on AMC stock.
And this is only including the shares out on loan that are recorded or reported for the public.
The total amount could be less or more.
Stonk-O-Tracker has recorded the interest rate of shares to borrow to be as high as 28.30%.
This number of course fluctuates, but interest rates struggled to move past 1% at the beginning of the year.
The rise in fees plays in retail’s favor.
Related: AMC Nears High Demand Levels: What to Watch For
Will high interest fees force hedge funds to close?
High short borrow fees may play a significant role in the closing of short positions for AMC Entertainment stock.
The cost for hedge funds to short AMC will only continue to rise as the demand to borrow these shares is there.
At this point, it seems financial institutions will need to decide when they’ve had enough.
Combine big price action with increased borrow fees and you strengthen the probability of short sellers closing their positions.
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Frank, you are missing a major piece of your calculation. You left off the price of the stock. It should be shares on loan * stock price * loan fee. So, currently, according to Ortex this morning, there were 192 million shares on loan with an avg cost to borrow of 21%. Stock price $8.31 at this time. Multiply these out and you have a yearly figure of $342 million. Divide by 365 and you have close to a $million a day.
So, the ‘smart money’ doesn’t feel bullish on their earlier short-n-dostort tactics. Hmm, okay…w/e.
What is the CTB for Ape frank?
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