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AMC Entertainment (NYSE:AMC), the movie theater chain that rose to fame amid a retail mania for meme stocks, seems on the verge of repeating history as bearish bets on the stock soar even as retail investors refuse to capitulate.
The past few days have not been kind to meme stocks such as AMC Entertainment and GameStop. To wit, AMC shares are now down 42 percent over the past 1 month, while GME shares are down 28 percent in the same period. Perhaps betting on the weakening resolve of so-called Apes, a term that is used to describe committed retail investors, the short interest in AMC shares is now on a rapid upward march.
As per a tabulation by Ortex, AMC Entertainment's short interest is now back above 20 percent of its entire float, corresponding to 106.32 million shares that have been sold short.
As we noted in a previous post, AMC Entertainment's short sellers were down $4.5 billion in June. However, the recent share price weakness has allowed the bears to recoup some of their losses, with the latest mark-to-market losses now standing at $2.87 billion, as per a tabulation by S3 Partners.
Of course, Mr. Adam Aron, the CEO of AMC Entertainment, has also been selling into this persistent weakness. As an illustration, Aron sold 312,500 shares on the 7th of December, netting him $9.65 million. Moreover, AMC's CFO, Sean Goodman, now owns no shares in the company after selling off the residual 18,316 AMC shares for an average price of $30.862 per share.
Meanwhile, as the attendance in theaters across the US remains subdued, AMC Entertainment is betting on NFTs to revive its mojo. The company has launched commemorative NFTs to celebrate the release of the latest Spider-Man iteration on the big screen. Earlier in December, it also announced "I Own AMC" NFTs on the WAX blockchain exclusively for the company's shareholders, entailing various discounts and a host of other benefits.
Meanwhile, Aron has officially turned down the idea of issuing NFT-based dividends while citing legal and regulatory issues. The rationale behind this demand is quite simple. When a company issues a dividend, all entities holding a short position in that stock have to replicate that action. For instance, if a hedge fund holds a short position of 1 million shares and the company in question were to declare a dividend of $1 per share, that hedge fund would be forced to pay $1 million to the lender from whom those shares were borrowed. AMC Entertainment shareholders want to see an NFT-based dividend in order to flush out hedge funds that are holding naked and synthetic shorts on the stock. The rationale is based on the idea that the NFTs would only be issued by AMC itself and that the hedge funds with a bearish bet on the stock won't be able to replicate this action, thereby precipitating such actors to close out their respective positions.
Readers should note that prima facie, the idea of NFT-based dividends does not appear to be illegal. After all, Overstock (NASDAQ:OSTK) became a pioneer last year when it issued digital dividends, where 1 share of the OSTKO blockchain-based security token was offered for every 10 shares owned.
