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In the midst of the coronavirus illness (COVID-19) pandemic, an AMC theatre is seen in the Manhattan borough of New York City, New York, United States, on January 27, 2021. Carlo Allegri/Reuters Reuters, July 2 – Short-seller IcebergResearch tweeted that it had made a bearish bet against AMC Entertainment (AMC.N) stock on Friday, sending the company down as much as 12%. Following Iceberg’s admission on Twitter that it had sold the shares short, which entails borrowing shares with the intention of purchasing them back at a cheaper price to settle the wager, the so-called meme stock was last down 8.9% at $49.40, after plunging as low as $47.77. “Our position is predicated on the company’s fundamentals and the fact that its stock price has been inflated by call options, which is always temporary,” said Iceberg Research founder Arnaud Vagner. Bearish investors forced to unwind their bets in the face of quickly rising stock prices have fueled rallies in AMC, GameStop (GME.N), and other businesses popular on internet forums like Reddit’s WallStreetBets this year. After beginning 2020 at $2.12, AMC shares were up more than 2000% year-to-date, while being significantly behind their June 2 top of $72.62. While there are risks connected with betting against meme stocks, according to Vagner, “Any significant increase is followed by a reversal. It is unavoidable.” Vagner, a former credit analyst who founded the firm in 2015, refused to share the firm’s short position’s specifics. Heavy trading of equity options, financial derivatives that offer purchasers the right to buy or sell shares at a fixed price in the future, regardless of where the stock price is, aided AMC’s recent climb. Market makers who sold AMC options were forced to buy the company’s shares to counter their exposure when the stock’s price rose, causing the stock to rise in a phenomenon known as a gamma squeeze. find out more AMC did not respond to a request for comment right away. “These meme stocks are so volatile in their trading that it doesn’t take much to trigger a huge swing up or down,” said MKM Parners analyst Eric Handler, who has a sell rating and a $1 price target on the company. Handler points out that AMC’s current trading price multiple of 45 times his 2022 EBITDA forecast contrasts to a record peak multiple of 9 times EBITDA predictions for movie theater stocks prior to the pandemic. “There will undoubtedly be some form of mean reversion with AMC at some point in the future, I’m not sure when that will occur. I don’t believe it can maintain a 45 times EBITDA multiple indefinitely “he stated In 2015, Iceberg made headlines when it exposed what it described the Hong Kong-based Noble Group’s “aggressive accounting practices.” Noble, a commodities trader, rejected the charges, but saw its profits plummet and was forced to liquidate most of its assets as a result. Akanksha Rana in Bengaluru and Sinead Carew in New York contributed reporting, and Patrick Graham, Arun Koyyur, and Dan Grebler edited the piece. The Thomson Reuters Trust Principles are our standards./nRead More

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