AMC’s CTB (cost to borrow) has increased to more than 255%.
However, the company’s short borrow fee (overnight) has increased to more than 731%.
According to the data, short sellers are paying between tens of millions of dollars if not hundreds of millions of dollars per month in fees to short AMC stock.
In a previous article, we discussed why AMC’s short interest matters — now we’re taking a closer look at the company’s CTB.
The cost to borrow is going to play a very important role in the coming months for AMC Entertainment.
This figure has steadily grown since AMC’s short interest came down from 23% to 14%.
After AMC reached its all time high of $72 per share in June of 2021, its cost to borrow dropped significantly allowing short sellers to take control.
However, AMC stock is up more than 90% in 2023 and the stock is getting a lot harder to borrow.
Brokers are even incentivizing shareholders to borrow their stock for a fixed fee.
What will happen if AMC’s CTB keeps rising?
Let’s discuss it.
Massive Short Positions Closing
Retail investors who entered AMC Entertainment stock during its run in 2021 have been down significantly.
But short sellers are also in a precarious position.
New short positions added this year are deep in losses as AMC’s share price has surged to more than 90% in 2023.
As AMC’s cost to borrow continues to increase, it makes it more difficult to short AMC stock unlike last year.
This means there is less ammo to drive share prices down and more runway to drive AMC’s price up through the means of heavy buying pressure.
If retail investors are able to drive AMC’s share price up again from sheer buying momentum, short sellers may be incentivized to get out before they incur even more losses.
There are big risks for short sellers as AMC’s CTB and share price rises.
What Will Happen to CTB in a Merge?
Since an AMC/APE merge will increase the number of shares in the float, it’s possible we see a slight decrease in AMC’s CTB.
However, since majority of the float is owned by retail investors, any additional shares are going to become rather difficult to locate which is why the cost to borrow will likely remain high even during a merge.
In other words, retail will just eat the new shares in the market.
Short sellers are in a precarious position — a short squeeze almost seems inevitable.
Is AMC Entertainment stock getting ready to reach a new all-time high this year?
I’m curious to know what you believe.
Leave your thoughts below.
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Frank, we’ve been hearing the same thing for the last 18 months. The cost to borrow is the hundreds of millions however this has been going on for the last 12+ months. The corruption is deep. Who’s to say it can’t continue for another 18 months or ever 36 months?
Leave your thoughts below!