Within a few days, the shares of the American cinema operator AMC rose 175 percent . Organized small investors had pushed the paper from just under 12 to over 26 US dollars within a week. On Thursday alone, the AMC paper recorded an increase of 36 percent.
And since the beginning of the year, the AMC share has shown price gains of more than 1,200 percent. The market value of the cinema chain is now around twelve billion dollars. The economic situation of the company does not even give rise to this fantasy. Because the company is clearly one of those economically hardest hit by the Corona crisis with its months-long lockdowns.
But private investors are concerned with hard economic facts, who agree on concerted buying campaigns via Twitter or the well-known Reddit forum Wallstreetbets Not. They are more concerned with making life difficult for the established players, especially the hedge funds.
shortseller in the sights of the Reddit horde
That’s why they are looking for each other mostly stocks for their investments, which have a high so-called short quota. That means institutional investors in particular have targeted a stock to bet on its downfall. You win if the share loses price.
If the hedge funds do not win these bets, however, there are no losses or if things get worse, i.e. if they win, the hedge funds lose money. In the worst case for these investors, a so-called short squeeze can occur. The hedge funds are forced to buy more shares, which initially increases the price.
The Gamestop rally earlier this year had led to such a short squeeze. At times the share price had shot up by several hundred percent almost suddenly. This scenario is also becoming more and more likely in the case of AMC, because according to Bloomberg information, both AMC and Gamestop are currently among the particularly heavily “shorted” stocks on the US stock market.
As the financial news service has calculated, the minus for shortsellers at AMC is to more than two billion dollars since the beginning of the year, 1.3 billion of which were lost in the past week alone. What the shortsellers lose, Reddit traders ultimately win. At the beginning of the year shortsellers had to accept enormous losses.
Renewed enthusiasm at Wallstreetbets
In the Reddit forum Wallstreetbets the same enthusiasm is spreading, which was felt in the Gamestop case at the beginning of the year. Forum posts like “AMC to Mars” suggest how the mood is.
Although the Reddit traders rely particularly on AMC, they are also pushing up other values, some of which are already known from the Gamestop rally. The video game retailer Gamestop is itself with a recent plus of 45 percent. But values such as the Build-a-Bear plush toy kit or the space (tourism) company Virgin Galactic see considerable increases of 65 and 63 percent respectively.
Cinema values show an upward trend, investors are optimistic
Back to AMC. In the corona crisis, cinema operators are not values that investors would lick their fingers for. AMC, for example, had to cope with a drop in sales of almost 80 percent in the corona year 2020 and an even more significant decrease had to be booked in the first months of 2021.
The fantasy could now be that investors expect an immediate increase in sales after the end of the corona measures. In fact, there could be significant catch-up effects once people are allowed to go to the cinema again. The opposite is also conceivable.
Nevertheless, investor circles seem to be dominated by optimism. This can be seen from the fact that other cinema values have also increased again since the beginning of the year. Leading after AMC is the cinema chain Marcus Corporation with 56, followed by Cinemark with around 40 and Imax with still around 25 percent share price increase.
For AMC, the new development is an opportunity. Because with a higher share value, liquidity is fundamentally much easier to obtain. And the company needs liquidity in order to survive the dry spell of the corona crisis. If that had succeeded, the Reddit traders would have successfully shown the hedge fund locusts once again how economics can work.
