AMC Entertainment (NYSE:AMC) has generated significant profits for investors recently…if they bet against it. The popular meme stock has been highly volatile lately as the company has prepared for the share conversion plan regarding its AMC Preferred Equity Units to take effect. When that conversion finally happened last week, AMC stock reacted poorly, taking a steep nosedive.
Although shares have slightly rallied today, they remain deep into the red. As of this writing, AMC stock is down more than 70% for the month. While that hasn’t been good for retail investors, it has netted short sellers some excellent profits. In fact, those with the foresight to bet on the stock failing have made more than half a billion dollars this month.
Does this mean that it’s time to continue shorting AMC? Let’s dive into the stock’s performance this month and discuss what’s likely to happen in the second half of the year.
Betting Against AMC Stock Has Worked Well
Just how much money have short sellers made from their AMC positions? According to Financial News, they’ve netted approximately $522 million, which cites data from market analysis platform ORTEX. While AMC stock has been volatile for the past six months, it hasn’t seen any real growth, certainly nothing sustainable. Any pops have been due primarily to meme stock momentum, meaning that they often end as quickly as they began.
While this has been an excellent month for AMC short sellers, this week proved particularly profitable. As trading began on Monday, Aug. 28, shares plunged, and short positions soared, erasing all its previous progress. Financial News reports that they collected more than $25 million within a 24-hour period. Since then, short interest in AMC stock has been rising and currently accounts for almost 30% of the stock’s float.
Given how well shorting AMC has worked this month, that certainly makes sense. The company has given investors plenty of reasons to bet against it this month as shares have declined so sharply that the New York Stock Exchange has halted trading. This trend is likely to continue as the outdated theater chain faces an uncertain future. As InvestorPlace contributor Chris MacDonald reports:
“AMC’s balance sheet remains in shambles due to the pandemic and secular headwinds created by streaming services. Folks just aren’t visiting movie theaters like they did before. And, while some recent blockbusters have provided movie enthusiasts with reasons to be excited, it may simply be too little too late for AMC stock investors.”
Roll Credits
It may be time to admit what many retail investors refuse to accept: meme stock momentum can’t save AMC. The company received an expected growth catalyst this summer as the release of popular films like Barbie drove many fans to the movies. But even that couldn’t help AMC stock stay in the green. NPR asked if movie theaters can sustain the “Barbie boost” that they received. As the dust settles, it’s clear that movie theater stocks certainly can’t.
As Financial News also notes, though, short sellers took a loss betting against GameStop (NYSE:GME). This suggests that the original meme stock may have something left to offer investors, but it’s clear that AMC does not. It is getting harder and harder to ignore the case for shorting AMC stock before it falls even further.
On the date of publication, Samuel O’Brient did not have (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.
