Short-Sellers Lose A Fortune As AMC Stock Bounces Back

AMC stock went up on Monday by over 15%, shocking investors, especially short-sellees who had bet against the stock. Investors shorting the stock lost an estimated $512 million in total as the movie-theatre chain's stocks went up on the bourse during Monday's trading session.

This is not the first time investors are losing on account of the AMC stock. In May, after a group of traders on Reddit's WallStreetBets, (the same group responsible for the rise of GameStop) furiously bought shares of the company, short-squeezing it, and sending shares up by bout 116%, short-sellers lost a reported $1.2 billion.

Shares of AMC were up by 2% to trade at $58.12 in premarket trading on Tuesday. Now, it sits at $59.04.

In this year alone, AMC's stock has grown by over 2,580% due to the online community of traders on the WallStreetBets.

Recent reports from two brokerages, Fidelity and Freetrade show that AMC has been the most traded stock by their customers, many of whom are small-time investors.

This happening comes just a day after Thomas Peterffy, Chairman and founder of Interactive Brokers a warning to investors to not bet against meme stocks like AMC.

"It is extremely tempting to short these stocks, but unless you have huge liquid resources, please try to resist the temptation because these prices can go to unimaginable highs before they settle down to a reasonable valuation, and you may have to cover on the high point," the online brokerage founder said in an interview.

"In the long term, stocks always approach their fundamental values, which in this case is much, much lower," Peterffy said, acknowledging the reason why short-sellers see opportunities in certain stocks such as AMC that have soared in price after becoming favored by Reddit traders.

The movie theater chain, which was devastatingly hit by the Covid-19 pandemic, has taken advantage of the retail investor enthusiasm by selling additional shares to raise money. It has also has launched initiatives like exclusive screenings that are fully targeted at its retail investors.