Is another Reddit inspired short squeeze in the making? Looking at the way AMC Entertainment ( AMC 24.26% ) ($AMC) is trading and the blogs surrounding the move, that answer could be a resounding YES.
Over the past two weeks, $AMC shares have nearly doubled, and it has to be putting pressure on short-sellers to cover sooner than later. And they may be wise to do so, especially with AMC still a highly shorted stock, with more than 20% of its shares outstanding sold short. The move started after AMB sounded quite bullish in its forecasts. Not only is the sector rebounding, but they also announced buying a stake in a gold and silver miner, throwing conventional wisdom out the window about what this stock can and will do in the future.
Peter Lynch used a word for when companies went astray and acquired businesses far outside their circle of competence: de-worsi-fication.” Of course, that’s true in this case. Precious metals mining has absolutely nothing to do with operating a business in the entertainment sector, unless of course, customers pay with bullion.
That’s not likely. Still, with a number of hedge funds were betting against it, and retail investors rallied around the stock, a move higher faster can indeed be in play. Moreover, CEO Adam Aron has inspired the AMC army and scared the shorts, saying that based on the reception for his deal for Hycroft, he’s going to look for more “transformational” deals on which to spend his $1.8 billion war chest.
Thus, shorts beware. And those already in, good for you. For newbies, though, investing in $AMC may be a wild ride. Hence, if you join the AMC army, wear a seatbelt.