AMC Short-Sellers Lose $1.23 Billion As Stock Rallies

As AMC Entertainment stock soars by as high as 127% since Monday, short-sellers have lost an estimated $1.23 billion in the past week.

The shares closed on Friday at $26.12, after soaring as high as 38% earlier in the day. The company's stock was the most active on the NYSE on Friday as over 650 million of its shares were transacted, putting its 30-day trading volume average at just above 100 million shares.

Close to 700 million shares being traded means that the entire company's shares were exchanged about 1.5 times on Friday, as it has about 450 million shares in total.

The company's short covering is a contributing factor to its rally this week. Unlike the regular U.S. stock which has an average of 5% short interest, AMC has about 20% of its shares sold short. 

Short-sellers of the company's stock have lost about $1.23 billion in less than a week. As the stock quickly rises, the sellers are forced to purchase back the borrowed shares to close out their short position and cut losses, which ironically sends the shares going even higher.

AMC's new retail investors, who are about 3.2 million in number, now own about 80% of the company's 450 million outstanding shares. Their efforts pushed the stock from $5 in January, to over $20 per share. Since January, the AMC stock has grown by 1,888%, greatly surpassing Wall Street expectations.

The movie-theatre chain, which is the biggest in the United States, has replaced GameStop as the most popular stock in the Reddit forum, WallStreetBets, where enthusiastic Reddit traders are encouraging each other to double down on AMC's stock and call options by sharing screenshots of their portfolio and touting massive return. 

The company has been struggling financially for a while, with over $5 billion in debt and an added $450 million needed for lease repayments. Due to the coronavirus pandemic, theatres were closed to curb the spread of the virus, slashing its revenue.

Even as the country is easing into normalcy and theatres are opening up, the company is still facing difficulty which includes heavy competition from streaming services like Netflix, and Amazon Prime.

Founded in 1920 in Missouri, AMC Entertainment Holdings is an American movie theater chain that is the largest movie theatre chain in the world. Currently, its stock on the NYSE (AMC) stands at $26.12.