AMC up 95% on Wednesday: Is there a new way to evaluate the value of meme stocks?
At the close of the US markets on Wednesday, AMC Entertainment Holdings Inc (NYSE: AMC) was trading at US$ 62.55, up by 95%. In after-hours, another 5%+ gain is likely.
The growth in AMC’s price began in earnest last week, with the price rising from US$12.38 to US$26.12. This week has been just as intense, with the previous two day’s booking noteworthy rises of 17% and the 95% mentioned above.
GameStop Corp (NYSE: GME) also experienced a considerable jump in price over the same time frame, up by 56.5%. As of Wednesday closing, the original meme stock was trading at US$282.24.
What’s driving the AMC price spurt?
While on its way to pre-pandemic patronage, the world largest Cinema company is undoubtedly not inspiring investors purely with its fundamentals. Rather, I suspect that investors are inspired by the recent media reports detailing the phenomenal losses that short sellers are continually racking up.
On 26 and 27 May, it was reported that GME and AMC short sellers lost $618 million and US$754 million on respective days, as the meme stocks rallied. Last week alone, AMC short sellers lost US$1.2 billion. These numbers are incredibly intoxicating for short squeezers.
Short Sellers losing hundreds of millions after AMC stock rally!
Is it just me, or is there more mainstream reporting of the short sellers’ daily losses more frequently?
While I believe there is an uptick, I don’t think these reports were the initial catalyst of the current run-up in price seen in GME and AMC. However, I believe it is spurring meme investors to increase their positions in the stocks and push past the ‘natural’ short squeeze price of the stocks.
If what short squeezers believe will eventuate in the mother of all short squeezes (MOASS), the extra price paid for each stock right now will be immaterial to them. Likewise, if short squeezers can inflict a little more pain on hedge funds along the way, then the cost incurred for another turn of the screw appears to be entirely worth it.
Please note, BlackBull Markets do not offer the option to trade AMC or GME. However, we do offer exposure to the major US indices and stocks such as APPL, TSLA, MSFT, etc.
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A theory: Elon Musk will hand Tesla Inc (NASDAQ: TSLA) over to a successor when Tesla can no longer generate much fanfare. At least, not as much as they currently do. This point in time will come once legacy car manufactures are firmly entrenched in the EV space. It is likely General Motors Company (NYSE: GM), Stellantis NV (BIT: STLA), and the dominant Asian brands will outcompete Tesla on price, range, and looks. Consequently, Tesla will be relegated to a periphery player. If legacy car brands convert their production to EV as fast as they say they will, I expect Musk will move on to his next project before 2030.
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