Hoping this will be allowed here since anything even remotely discussing the financial illiteracy of this downright fanatical movement is banned or downvoted instantly on the relevant subreddits, and was censored on unpopularopinions
This following around the attempt to “short squeeze” hedge funds on AMC stock has devolved into a nonsensical cult. I have an accounting background and work in Wealth/Investment Management. As far as I can tell, the people pushing this short squeeze nonsense for AMC are entirely financially illiterate, and are either knowingly malicious, or uniquely foolish. “We can squeeze AMC to $500K! Its not a meme!” -r/amcstock No. You cant. A share price of $500K would place AMCs total valuation at approximately $225 TRILLION dollars. Thats TWICE as much as the entire US stock market. Do you guys even understand how margin calls work? (Hint: if the short sellers dont have $200 trillion, you cant extort them for $200 trillion).
Moving on, short interest on AMC is approximately 15% of float. The position could be liquidated in 45 minutes without even causing a blip on the radar, you wouldn’t even notice if they repurchased every needed share to close out the position (100% terminating your “squeeze” potential). You can’t hold them hostage the way you did on GME when over 100% of GME shares were sold short at one point (meaning they had to repurchase every share in existence and then some to cover).
Additionally, AMC execs are absolutely abusing this fanatical level of enthusiasm to pocket your capital for the company. Just yesterday it was announced AMC was issuing an additional $230M in shares to “raise capital” thanks to the current exuberant share price (thats shareholder dilution idiots, thats your money they’re directly pocketing with no added value to the shareholder). r/amcstock celebrated this as a good thing, as any good cult would, noting the share purchaser (Mudrick Capital) was helping them squeeze the stock! Only wait, within just an hour of closing the deal, Mudrick dumps the entire share balance at a ~$50M profit, publicly announcing the share price is unsustainably high. Like the good cult they are, r/amcstock promptly pivoted to saying this was also good for AMC. (If you haven’t figured it out by now, everything that happens is good for AMC, and even better for the short squeeze).
The people pushing this sort of stuff all over twitter know all pf this of course. They know AMC isn’t going to $500K, or $100K, or even $75 per share. But they do know they bought in at $10 per, or have some options expiring next month, and if they can get the hype up enough they still might be able to make a shitload of cash selling their shares to the next sucker that comes along at $35 a share and thinks this short squeeze nonsense is legit, and it’s right around the corner..
Why take the time to type all this up you might ask? Because this wild echo chamber is going to inevitably result in the direct harm of people that don’t know any better, and can’t afford the massive losses. College kids gambling with student loans. People mortgaging their homes to take out weeklies at the top of the options chain because “the mother of all short squeezes” is going to make them a millionaire, only to lose it all. People with legitimate mental illness that aren’t going all in on AMC at $35 a share with any sort of self awareness at all, but instead this misguided belief they are fighting a valiant battle against the evils of wall street. These people are going to be hurt, badly. Its sad, and incredibly annoying.
Sources: r/amcstock (take a gander, I’ll give it five posts before you begin to get the echochamber/cult vibe).
Submitted June 01, 2021 at 07:46PM by Liftthatbox https://ift.tt/34Fmi1G
