AMC ends wild trading day down 18% after share sale

After the company announced the sale of its shares, AMC Entertainment’s stock price ended its 18% roller coaster trading session on Thursday. Crazy Trading Day is the latest in the theater chain meme stock movement promoted by retail investors uniting on Reddit. After AMC stated that it might “from time to time” offer and sell a total of 11.55 million Class A common stocks, the stock price fell to $37.66 during the session. The additional shares dilute the value of existing shareholders’ existing shares. Subsequently, AMC’s stock price rebounded from a low point and turned green. Previously, the company stated that it completed the offering only a few hours later and raised approximately US$587.4 million.

The stock closed at $51.34 on Thursday. Retail investors—many active on Reddit’s WallStreetBets forum—have been leading the AMC’s rally, and AMC executives have also noticed this. On Wednesday, the company announced a new portal to connect with individual investors and provide free popcorn, exclusive screenings and other benefits to those who hold its shares. JPMorgan Chase pointed out that last week’s retail orders into AMC jumped to 583 million US dollars, 6.9 standard deviations higher than the average level of the past year. According to their quantitative strategy, this imbalance may cause the stock to perform better in the coming weeks.

On Wednesday, AMC surged 95% during regular trading hours and closed at a record high of $62.55. According to FactSet’s data, its previous closing record was $35.86, which was reached in 2015. AMC’s stock price soared, hitting a high of US$72.62 during the session, which was much higher than the previous record of US$36.72. Due to volatility, trading was stopped again on Wednesday and Thursday. The stock rose more than 100% at one point on Wednesday. At the end of the day, more than 710 million shares changed hands—almost twice the number of AMC shares outstanding. The company’s 30-day average trading volume was only 143 million shares.

So far this year, AMC has risen by more than 3,000%, bringing its market value to more than $32 billion. This makes it more valuable than stocks such as Delta Air Lines, State Street and Best Buy. In January, in a similar incident with GameStop and other memetic stocks, short sellers who resisted increased their bets on AMC stock last month, which could push the stock price higher. According to data from S3 Partners, as of Wednesday, about 18% of AMC’s tradable stocks were still short-sold. According to S3 data, on Wednesday, as the stock price soared, short sellers lost $2.8 billion. According to S3, this has resulted in their year-to-date loss of more than $5 billion. Short sellers such as hedge funds borrow stocks from investment banks and sell them, hoping to buy back the stocks at a lower price and return the stocks, so that the difference will be in their pockets. However, when stocks soar, so-called short squeezes may occur, and investors are forced to buy back stocks to reduce losses.

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