- Shares of AMC Entertainment jumped 300% on Wednesday.
- In addition to GameStop, individual investors are piling into other heavily shorted names, creating short squeezes.
- Hedge funds that are short are rushing to cover losses.
- Trading in AMC was halted several times during the first hour of trading due to volatility.
The frenzy started right out of the gate. About 10 minutes into the session, trading in the stock was halted for the first time due to volatility. Shares were halted several additional times during the first hour of trading amid heavy activity.
The stock finished the day with a 301.21% gain to close at $19.90. That was slightly below the stock's high of the day — $20.36 — from just after the opening bell. During premarket trading shares had been up as much as 360%.
Roughly one hour into trading more than 500 million shares had already changed hands — significantly above the stock's 30-day average volume of 86.8 million shares a day. By 4pmET more than 1.1 billion shares had been traded.
Individual investors are creating short squeezes by piling into these names, while hedge funds that are short on the other side are rushing to cover their losses. They are promoting their activity on the wallstreetbets Reddit board, which has 2.8 million members. AMC appeared to be a growing topic of interest on the board.
Short selling is a strategy in which investors borrow shares of a stock at a certain price in expectations that the market value will fall below that level when it's time to pay for the borrowed shares.
The influence of retail investors — most apparent in GameStop — has captivated the Street in recent days, and speaks to a new class of traders who grew up amid the pandemic. GameStop stock more than doubled on Wednesday, rising 134%.
"The spotlight has pivoted from Large Cap Tech/'Retail Favorites', to a largely ignored corner of heavily shorted smaller cap stocks," Barclays said Tuesday in a note to clients. "In a span of a month, retail trading has significantly impacted price action and sentiment in these heavily shorted names, cementing the dominance of retail option investors."
TD Ameritrade midday Wednesday said it put in place restrictions on certain transactions involving GameStop and AMC Entertainment "in the interest of mitigating risk for our company and clients."
AMC has 24% of its float tied up in short interest, and GameStop's short interest stands at 138%, according to FactSet.
AMC jumped 26% on Monday and 12% on Tuesday, and is now up 466% this week. On Monday, the company announced it had secured enough financing to remain open and operational deep into 2021.
"This means that any talk of an imminent bankruptcy for AMC is completely off the table," said CEO Adam Aron.
For the month, AMC shares are up more than 830%. However, given the stock's downward decline in recent years, a smaller gain now accounts for a much larger percentage move.
The fervor spread to some other heavily shorted names in early trading. Bed Bath & Beyond jumped 43%. According to data from S3 Partners, the retailer is the second most-shorted stock on the market, with 64% of its float sold short. Eastman Kodak, another speculative name, jumped 28%. Short interest in that stock is roughly 20%.
Amid the surge in AMC Entertainment, shares of AMC Networks were also on the move. The stock jumped as much as 22% before giving back those gains. Shares closed 19.3% lower.
Short interest is the number of shares that are sold short relative to a company's total available float of stock.