Why AMC Stock’s Short Interest Data Matters

AMC stock short interest data

AMC stock’s short interest has been rising.

Short interest today is sitting at approximately 25.83%, per Ortex data.

The cost to borrow for AMC stock has also risen drastically — currently at 255%.

Short sellers are paying between tens to hundreds of millions of dollars per month to short the stock, at least according to the data.

So, why is all of this information important?

Why does it matter?

See, AMC stock’s short interest data is a recipe for a short squeeze, something similar to what occurred in January and June of 2021.

Redditors saw AMC’s high short interest data could drive short sellers to close their positions by buying the stock as a collective.

Shares rose from $2 to more than $20 per share in January and from $9 to more than $72 per share later in June.

AMC’s short interest came down to 14% after the surge but began to rise again all throughout 2022.

Now the stock’s short interest is around the same as it was when shares spiked to its all-time high.

Does this mean AMC may have a short squeeze this year?

Here’s what we know.

What Triggered AMC Shares to Surge in June of 2021?

AMC stock all-time high

The short and simple answer is lots of buy volume, or high borrow fees that may incentivize short sellers to close their positions.

Redditors knew that if they were able to bring short seller value down, margin calls would at some point force them to close their positions.

Enough buying pressure would later create a chain reaction of buy-back activity in AMC, hence why we saw a drop in short interest from 23% to 14% during the time shares were skyrocketing.

But how about dark pools and off exchange trading that suppress the stock’s share price?

Gary Gensler has said that more than 50% of trading goes through dark exchanges.

So where does that leave AMC in terms of creating big enough buying pressure to squeeze short sellers?

Technically, unchanged.

If 50% of buy orders aren’t affecting the share price, it just means volume has to be big enough to move the needle.

See, when AMC was making big intraday moves in 2021, the company was having 500 million to 1 billion volume days.

AMC’s average volume today is only 33 million — volume in common shares dropped by 50% since the inception of its equity, APE.

What Will Create Massive Buying Pressure Again?

AMC short squeeze

Market history has always showed us that buying slows down during a bear market despite stocks trading at a bargain.

AMC stock is up nearly 70% this year alone, but it’s nowhere near breaking even for most shareholders who got in during the climb in 2021.

Buying was cut in half after the inception of APE, so a conversion would direct all attention back to common shares of AMC stock.

And if AMC’s reverse stock split gets approved, AMC’s share price will need to reach the high hundreds of dollars per share just to break even.

The question is who’s going to buy shares of AMC stock at $50, $80, $100, or even $200+?

Especially during a bear market.

The only other solutions would be for short sellers to close their positions due to the rising costs of shorting the stock.

Here short sellers will either need to buy back the company stock at a win, loss, or break even.

This scenario may happen at any moment, but AMC’s cost to borrow must remain high or continue to rise.

So, why does AMC stock’s short interest matter?

It gives us insight as to how much shorting is happening in the company, and how to calculate approximately how much money short sellers are burning.

It validates the possibility of another massive price movement.

You can keep an eye on AMC’s short interest data updated daily here.

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2 Comments

  1. Chris Brandsma

    So short interest can cause shorts to close their position to stop the bleeding. Will they be able to close at the current cost? I know that most retail AMC owners won’t sell at $10.00 or $20 so I assume that will cause the share price to rocket. Is there anywhere shorts can buy at low costs?

  2. Frank Nez

    Leave your thoughts below!

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