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AMC shares triple as retail investor raids of hedge fund short-term spreads from GameStop

Street performers in costumes from Minnie Mouse pass in front of an AMC cinema at night in the Times Square neighborhood of New York, October 15, 2020.

Amir Hamja | Bloomberg | Getty Images

Shares of outspoken cinema giant AMC Entertainment more than tripled during pre-market trading on Wednesday amid a stream of trading activity in some of Wall Street̵

7;s most short-lived stocks.

AMC shares jumped 230% ahead of Wednesday’s opening clock, while GameStop rose 67%.

Individual investors create short squeezes by piling into these names, while hedge funds that are short on the other hand rush to cover their losses. They promote their activity on walldreetbet’s Reddit board, which has 2.8 million members. AMC seemed to be a growing topic of interest on the board.

The influence of retail investors – most visible in GameStop – has captivated the streets in recent days and speaks to a new class of traders who grew up in the midst of the pandemic.

“The spotlight has shifted from Large Cap Tech / ‘Retail Favorites’ to a largely ignored corner of severely short-circuiting smaller cap stocks,” Barclays said Tuesday in a note to customers. “Over the course of a month, retail has significantly impacted price action and sentiment in these much shorter names and cemented the dominance of investors in retail options.”

AMC currently has 24% of its float tied up in short interest. Meanwhile, GameStop’s short-term interest rate is 138%, according to FactSet.

AMC jumped 26% on Monday and 12% on Tuesday, bringing its week-to-date gain after just two days to more than 40%. On Monday, the company announced that it had secured enough funding to remain open and operational deep into 2021.

“This means that any talk of an impending bankruptcy for AMC is completely off the table,” said CEO Adam Aron.

During the month, AMC shares have risen by more than 130%. Given the declining fall in the share in recent years, an obvious gain now obviously represents a much larger percentage movement.

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