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Short seller AMC made huge $1.2 billion after stock rally

A street performer in a Minnie Mouse costume walks past the AMC movie theater at night in New York’s Times Square, Oct. 15, 2020.

Amir Hamja | Bloomberg |bergGetty Images

Investors who short meme stocks AMC Entertainment Losses of $1.23 billion are expected in the past week. As the stock has jumped more than 1

16% since Monday, according to data from S3 Partners.

The rally cooled late Friday after AMC shares surged as much as 38 percent in early trading. Shares closed at $26.12 a share on Friday, up from $13.68 on Monday. At their peak, the shares reached $36.72 each. share

AMC was the most active stock on the New York Stock Exchange on Friday. Since more than 650 million shares were changed, the average 30-day trading volume exceeded 100 million shares, according to FactSet.

With 450 million shares outstanding, the entire company changed hands nearly 1.5 times during Friday’s trading.

The so-called short-term reporting could contribute to AMC’s massive rally this week. The company has about 20 percent of outstanding shares sold short, compared to a 5 percent average short-term interest in U.S. generics, S3 Partners said.

When stocks that are heavily shorted jump higher. Short sellers are forced to buy the borrowed shares to close the sell position and cut losses. Forced buying is likely to provoke an even stronger rally.

AMC’s new retail investor, standing at 3.2 million shares, owns about 80 percent of the company’s 450 million shares as of March 11, AMC reported earlier this month. their efforts, which increased in January. It pushed the stock to $20 per share, up from $5, and allowed AMC to reduce its debt by about $600 million.

The individual investor’s agenda is to keep AMC alive and “holding on” to hedge funds. An analyst told CNBC.

AMC shares, which have soared more than 1,100% since January, have defied Wall Street analyst forecasts. AMC’s business is under severe threat, has about $5 billion in debt and needs to defer 450 rent payments. millions of dollars as most of the revenue dried up during the ongoing coronavirus pandemic. The theater has been closed for months to help stop the spread of the virus. and when the company opened the door again Few consumers feel comfortable attending movie screenings. and movie studios suspended new screenings.

As the movie theater business recovers, AMC continues to face strong winds. Although the company ended the first quarter with $1 billion in liquidity. But as much as ever in its 100-year history, that cash will last until 2022 unless viewers return in large numbers to offset months of unpaid earnings.

Although initially box office revenues are promising. But the fundamentals of the movie theater business changed last year. This includes the capacity of the cinema. Release date in conjunction with streaming services. and the number of days the movie is released in theaters

Rich Greenfield, co-founder of LightShed Partners, said: “What really matters is In the long run, this company won’t make any more money,” CNBC’s “Squawk Box” said Friday morning. Traded at 7x EBITDA before the pandemic It is currently trading at 25 times EBITDA and is in a worse position today with a changing industry. This defies all logic.”

On the last day of 2019, AMC had a market cap of $751.87 million last Friday. That value is estimated at $11.9 billion, according to FactSet.

— of CNBC Yun Li Contribute to this report

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