According to Fintel’s short interest tracker, the cost to borrow AMC Entertainment (NYSE:AMC) stock has been remarkably volatile of late. High borrowing fees often indicate high demand from short sellers, which, given AMC’s recent success, may paint a foreboding picture.
AMC’s cost-to-borrow fee has been all over the place recently. Indeed, the past several days have seen AMC’s short borrow rates move from $991 on Monday, to $1,026 on Tuesday, before falling to $263 on Wednesday. Today it currently sits at around $228. This has accompanied a notable drop in short sale volume, from 73 million short sales Monday, the figure dropped to roughly 9.8 million sales on Wednesday.
It appears the short sellers have jumped onto the sometimes meme stock following its recent rally. AMC stock soared more than 33% on Monday after reporting the results of a record-breaking weekend for the movie theater chain.
Short Sellers Flock to AMC Stock Following Blockbuster Rally
AMC recorded its strongest weekend in several years from last Thursday to Sunday due to the simultaneous release of two summer blockbusters, Oppenheimer and Barbie.
AMC stock has also benefitted from a recent court decision, surprisingly, against the company. Indeed, Delaware Chancery Court rejected the company’s attempted conversion of AMC Entertainment Preferred Equity Units (NYSE:APE) into AMC common stock.
Investors generally disapproved of the fundraising effort as it was likely to result in stock dilution for current AMC stockholders. In fact, some have speculated the court ruling was the result of several thousand letters of disagreement to the stock conversion sent to the Delaware judge presiding over the case.
This clearly has pushed short sellers back onto the stock in hopes of catching a tidy windfall when the stock deflates back down. Reasonably so, at $5.85 per share, AMC’s stock was at its highest level since May of this year. While the stock has slowed its roll somewhat, currently trending at $5 per share, clearly, some short sellers believe the meme stock darling still has room to fall.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
