Street performers in Minnie Mouse costumes pass by at night in front of an AMC movie theater in New York’s Times Square neighborhood, Oct.15, 2020.
Amir Hamja | Bloomberg | Getty Images
Shares of controversial cinema giant AMC Entertainment more than tripled during premarket trading on Wednesday amid a wave of trading activity in some of Wall Street’s most short stocks.
Shares of AMC were up 230% before Wednesday’s opening bubble, while GameStop was up 67%.
Individual investors create minor bottlenecks by piling on these names, while hedge funds that are short on the other hand to cover their losses. They promote their activity on the wallstreetbets Reddit board, which has 2.8 million members. AMC proved to be a growing topic of interest on the board.
The influence of retail investors – most evident in GameStop – has captivated the streets in recent days, appealing to a new class of traders who grew up during the pandemic.
“The spotlight has shifted from Large Cap Tech / ‘Retail Favorites’ to a largely ignored corner of heavily short-short stocks of small caps,” Barclays said in a note to clients Tuesday. “In the space of a month, retail has had a significant impact on price action and sentiment in these strongly short-short names, reinforcing the dominance of private options investors.”
AMC has currently held 24% of its float in short-term interest rates. Meanwhile, GameStop’s short-term interest rate is 138%, according to FactSet.
AMC jumped 26% on Monday and 12% on Tuesday, bringing the week’s gain so far to over 40% after just two days. On Monday, the company announced that it had raised enough funding to remain open and operational well into 2021.
“This means that any discussion of impending bankruptcy for AMC is completely off the table,” said CEO Adam Aron.
AMC shares are up more than 130% this month. However, given the stock’s downward decline in recent years, a smaller profit now naturally means a much larger percentage movement.