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AMC Stock: Short Sellers' Nightmare

AMC shorts have not been sleeping well this year. With the Reddit community united against them, bears have raked in sizable losses in 2021. Wall Street Memes talks about this epic “ape vs. suit” battle today.

AMC stock  (AMC) - Get Report, up 2,200% year-to-date on the back of two massive short squeezes, has been one of the hottest topics of conversation in the stock market this year. And the war between AMC stock holders and short sellers seems far from over.

“Hodlers” have been winning for now. But with the recent drop of 27% since AMC’s mid-June peak, short sellers have clearly not thrown in the towel. Will AMC finally go to the moon – whether it is $100 per share or the $100,000 that some crave – or will meme mania fizzle out?

Figure 1: AMC theater.

Figure 1: AMC theater.

Today, Wall Street Memes reports from the warzone.

(Read more from Wall Street Memes: How Much A $1,000 Bet In AMC Stock Would Be Worth Today)

The battleground

AMC’s short interest is currently around 17%, according to data from Yahoo Finance – the equivalent of $4.8 billion in short positions. S3 Research reports that, during the month of June, short sellers incurred losses of $2.8 billion on AMC shares. This was the US stock that inflicted most pain to short sellers, followed by Tesla  (TSLA) - Get Report and Apple  (AAPL) - Get Report.

Figure 2: US short mark-to-market unprofitable trades.

Figure 2: US short mark-to-market unprofitable trades.

As a side note, and unlike AMC, GameStop shares  (GME) - Get Report saw sharp short seller retraction in the last month, likely driven by bears’ monumental losses earlier in 2021. According to data from S3 Research, one-third of GME shorts have closed their positions since January, possibly cooling the long vs. short battle on that front.

(Read more from Wall Street Memes: Newegg Stock: A Different Kind Of Short Squeeze)

Tools at apes’ disposal

AMC short sellers have had a smidgen of relief these past few weeks, as share price dropped sharply since mid-June. But with short interest still elevated and rising, there are a few billion dollars’ worth of short positions left for the apes to attack.

For the next bullish wave to form, apes need a solid shareholder “wall” to counter the effect of paper hands and institutions that stick to their short positions. Capital will be needed to offset the eventual near-term losses and for longs to keep up with short sellers.

Newegg stock  (NEGG) - Get Report has been a recent case of how longs can finance the war against short sellers on the AMC front. One-off meme attacks could become a strategy for apes to stay liquid and in the game.

Apes have one disadvantage over shorts: institutional traders tend to have higher reserves than retail investors, which can come in handy in resisting unfavorable price movements. To offset this potential weakness, apes have YOLO attitude on their side: unwavering commitment to the cause, even if at the expense of market losses.

AMC sentiment on Reddit

Reddit is one of the main thermometers for ape sentiment towards AMC. In fact, the number of mentions and positive comments on the platform has been correlated with the stock's price movements, as the chart below illustrates. A drop in the volume of bullish comments may have contributed to the recent decline in the share price.

Figure 3: WSB sentiment on $AMC.

Figure 3: WSB sentiment on $AMC.

ApeWisdom tells a similar story. According to the source, AMC was only the third most debated stock on Reddit as of July 9. It had 26% fewer mentions in the last 24 hours, even after the stock’s modest recovery on Thursday. See table below.

Figure 4: Trending stocks on Reddit in the past 24 hours.

Figure 4: Trending stocks on Reddit in the past 24 hours.

Despite the recent cooling down in bullish pressures on AMC, the war is probably far from over. For as long as there is still elevated short interest in AMC, resilience to endure the recent losses and renewed “buzz” around the stock, another short squeeze is not out of question.

Twitter speaks

Short sellers have accumulated large losses in short positions in AMC, but short interest remains elevated. How long will it take for AMC to go to the moon?

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)