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Besides GameStop, AMC is one of the most shorted stocks on Wall Street.
The retail mania for AMC Entertainment Holdings Inc (NYSE: AMC) took a new turn in the past week as Reddit and other social media investors reignited their love for the stock. According to a CNBC report, over 650 million were traded on Friday. The increased trading activity was sustained almost all week long with more than 700 million shares exchanging hands on the NYSE on Thursday, a build-up from Wednesday’s 1.1 million shares.
As reported by Barron’s, investors organized in Reddit forums like WallStreetBets and AMCStock have touted the recent rally as just the tip of the iceberg compared to what is to come. The members of these groups are reportedly awaiting MOASS,” meaning the mother of all short squeezes. A key boost for the AMC retail mania is the added incentive being extended by the company’s CEO, Adam Aron, who has made a promise not to issue any new shares of the company this year. Aron has also pledged donations to charities that these select groups of retail investors are backing.
“I’m quite optimistic about the new shareholder base of AMC,” Aron said in an earnings call earlier this month. “Just go on Twitter, just go on Reddit, just go on YouTube, read what these people write. They love AMC. And these are not people who are just going to be investors in AMC. These are going to be customers of AMC who come to our theaters and enjoy watching movies at our theaters as paying guests.”
Last week’s rally pushed AMC stock to a weekly gain of 116%, however, the stock closed Friday’s session down 2.17% to $26.12, after soaring to an intraday high of 38%. The stock is now up 1,132% on a year-to-date basis atop a market capitalization of $11.76 billion.
AMC Retail Mania Not Enough to Offset the Company’s Capital Woes
Besides GameStop Corp (NYSE: GME), AMC is one of the most shorted stocks on Wall Street. According to an analogy by S3 Partners, there are as many as 20% of AMC shares sold as shorts, a bogus figure compared to other popular stocks at about 5%.
The company is currently embroiled in a debt of about $5 billion, as well as $450 million in deferred lease repayments. The fact that earnings have also paled due to the COVID pandemic has pushed Rich Greenfield, co-founder of LightShed Partners to maintain a pessimistic position on the firm’s future outlook irrespective of the retail mania.
“All that really matters here long term, this company is never going to make cash again,” Greenfield said Friday on CNBC’s “Squawk Box.” “They will never generate cash with their current capital structure. It traded at 7 times EBITDA pre-pandemic. It’s now trading at 25 times EBITDA right now and it’s in a worse position today with the changed industry. This just defies all logic.”
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