A joke where everyone is making fun of everyone in grand & crazy pump-and-dump schemes. But I can’t blame AMC. I blame the Fed.
By Wolf Richter for WOLF STREET.
AMC Entertainment Holdings – whose shares became the incredibly spiking #1 the-zoo-has-gone-nuts meme stock in recent days, multiplying by a factor of 6 in seven trading days, before plunging today – announced in an SEC filing early this morning that would try to sell 11.55 million shares to retail investors, with B. Riley Securities and Citigroup Global Markets as sales agents.
Let the cold-calling begin. AMC will pay the sales agents “up to 2.5% of gross sales” in commissions plus reimburse them for certain expenses. The share sales will be conducted whenever, in bits and pieces, via this “at-the-market” offering.
The fun thing about the updated prospectus is the explicit acknowledgement that the zoo has gone nuts, that the insane movements of AMC’s shares are proof of it, and that investors should not touch this thing with a 10-foot pole.
This is a class-act CYA, much needed during the securities lawsuits that are likely to follow. It will be able to tell stiffed plaintiffs: “We told you so.”
But it also shows that AMC is counting on these traders to not read the warning, and to not heed it if they read it. AMC is counting on these traders to instead buy those shares, with those traders relying on their Reddit crowd to bail them out of those shares later at a much higher price – the social-media-organized pump and dump.
With a palpable sense of astonishment, AMC points out the crazy share price movements that it is now going to take advantage of:
“For example, during 2021 to date, the market price of our Class A common stock has fluctuated from an intra-day low of $1.91 per share on January 5, 2021 to an intra-day high on the NYSE of $72.62 on June 2, 2021 and the last reported sale price of our Class A common stock on the NYSE on June 2, 2021, was $62.55 per share,” it says.
Well “was $62.55,” now is $44 at the moment.
“We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last,” it says.
And in bold is says: “Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.”
“Extreme fluctuations in the market price of our Class A common stock have been accompanied by reports of strong and atypical retail investor interest, including on social media and online forums.”
It warns that its shares “may continue to experience rapid and substantial increases or decreases unrelated to our operating performance or prospects, or macro or industry fundamentals, and substantial increases may be significantly inconsistent with the risks and uncertainties that we continue to face.”
It blamed the spike in the share price on “retail investors,” their hype-mongering “on social media sites and online forums,” their access to data about “the amount and status of short interest in our securities,” and their access to leverage and options.
It also blamed the “short squeeze” itself and “coordinated trading activity” that caused the spike in the price of its shares, and warns how this may end:
“As traders with a short position make market purchases to avoid or to mitigate potential losses, investors purchase at inflated prices unrelated to our financial performance or prospects, and may thereafter suffer substantial losses as prices decline once the level of short-covering purchases has abated.”
These “retail investors” are the very people that AMC is now ruthlessly taking advantage of by selling them 11.55 million more shares at those short-squeeze-and-coordinated-social-media-hype “inflated prices” that it says could get wiped out.
AMC says its new-found market capitalization, based on the idiotic price of its shares, is idiotic itself, dressed up in its CYA legalese:
“Our market capitalization, as implied by various trading prices, currently reflects valuations that diverge significantly from those seen prior to recent volatility and that are significantly higher than our market capitalization immediately prior to the COVID-19 pandemic,” it says.
“These valuations reflect trading dynamics unrelated to our financial performance or prospects,” it says.
“Purchasers of our Class A common stock could incur substantial losses if there are declines in market prices driven by a return to earlier valuations,” it says.
And AMC concludes is warning that the price of the shares it’s going to sell “may fluctuate dramatically, and may decline rapidly, regardless of any developments in our business.”
I can’t blame AMC. They’re in a tough business. They’re losing a ton of money. They got close to a bankruptcy filing last year, had it not been for their ability to extract more cash from those crazy markets.
The decisions makers in this deal are just ruthlessly taking advantage of people that are desperately eager to be ruthlessly taken advantage of, and that are willfully and eagerly participating in one of the grandest-ever pump-and-dump schemes, organized and coordinated in the social media, particularly on Reddit.
But it does show how ridiculous the entire stock market has become, thank you halleluiah to the Fed and its grandest ever shenanigans.
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Sucker Filter on steroids.
It uses reverse cosmos, spewing brown acid All over the trading floors, desks, and keyboards.
Enjoy the trip through the Fed ka(lied)o$cope.
When I first read B. Riley Securities, I initially read Wiley. E. Coyote!
They are doing a pump-and-dump on Acme stock.
Also, someone artfully managed to squeeze a lot of truth-telling into a caveat emptor liability release form. It makes me wonder if they are a WS reader (in addition to a source for WS news now too)
“Also, someone artfully managed to squeeze a lot of truth-telling into a caveat emptor liability release form.”
True…although the truth tends to get lost in 500 page, single spaced documents…
The stock market is one of the greatest modern creations as it allowed investors to own pieces of companies and diversify risks. Maybe modern central banks and modern stock markets can not function together.
As long as the central bank can print “savings”, then long term investment is inferior to short term gambling until it all goes over the cliff.
I sure hope that other states are better off than California. A drive around reveals so many failed businesses in Southern California that little hope remains: I do not consider bank branches, insurers, etc., which entities are owned by the ultra-rich banksters and effetively subsidized by the ultra-low interest rates of their “Fed.”
San Diego is devastated. The small and middle sized businesses in our state have been hollowed out in many places. How will all of the entrepreneurs that were forced out of business and are insolvent now restart new businesses? If they do not, who will?
I am not hearing those thoughts on SD. The tourist business is down sharply while residents who are fed up with the vacation rental scheme are getting some relief. Fewer Zonies on our beaches. The service workers, hispanics, are getting by. They have pricing power and wage leverage I think. If you ask the average SD resident who isn’t dependent on tourist cash, they would say things are better. My thesis on small business is that those who are lost, which have some reason to exist, will be replaced by corporate franchises. The process of working synergies on this economy is really just getting underway. Former business people will get good paying jobs working for these corporates with fewer headaches and responsibilities. Something is lost and something is gained.
A walk around the restaurants in downtown San Diego will reveal the issues: lots are now closed or barely surviving. The small and medium-sized businesses in our economy are the main employers and a core component of the economy.
The closures mean fewer of those low paying jobs. Even surviving fast food restaurants are now automating, so their staffing will be drastically cut.
Your idea that the billionaires’ corporations will step in and give the former restaurant employees, who were making a little over minimum wage, if they were lucky, better jobs (as corporate directors maybe?) is amusing but unrealistic. Instead, we are seeing a huge slice of the American work force become permanently unemployed: this is common in other countries, which gives rise to criminality and higher prison populations, not better financial prospects.
China’s subsidized steel and other products produce thes conditions: they drove out US producers and manufacturers out of business with subsidies to their own companies, so that now, the remaining, US jobs are either high up in the remaining employers or in very low-wage jobs. Now, those low wage jobs disappeared or are disappearing, so huge portions of American workers will not be able to get jobs that enable them to even support their families.
As America’s wealth keeps getting sucked out by China year by year, even the high paying jobs with the fewer employers, e.g., the banksters, will be paying less and less as time goes by.
Well, that’s what happens in a short squeeze.
I like the way AMC handled this.
They have no responsibility for the pump and Dump and they are being straightforward about what they are selling.
A dog turd on a reused paper plate.
They made money. They also likely got some bailout money too for the struggling corporate theater chains. And even if theaters are crap after lockdown, they still made more money than what it’d be otherwise bankruptcy.
Life is good.
Read about what was happening in 1929 before the stock market crash. Only hyperinflation might decrease the size of the crash. Some companies have PE ratios of 500, limited growth prospects, and their stock prices have held steady!
It just goes to show that investors are no longer reading the financial statements, which are now inflating earnings and under reporting losses anyway. We are in a tulip mania like period.
One more thing, there will be over corrections: in other words, even valuable shares and assets will see their prices drop as investors’ fears overcome them. I bet that rather than being safe havens, fears about the Ponzi-like model of the cryptos will crater their prices, sooner or later.
That is particularly the case because banks and now countries which are not bankster-controlled (e.g., China, since the CCP, for example, is an independent, criminal gang) are trying to stamp the cryptos out and will stamp out one after the other.
Most people now invest in S&P500 (or similar) trackers, so overvalued stocks crashing will drag many peoples investments down. Also, when people start selling their S&P500 trackers that means the entire underlying will be sold, including components that are less overvalued.
The most simple method of stock prices returning to the long trend line gives you around 1560 on SP500.
And don’t forget that returning to the median valuation is not enough, as you are supposed to spend half the time below that level. Therefore, a crash should not revert prices back to “normal” but to valuations way below that!
Feels like the warnings on cigarettes, people smoke them anyway.
Don’t hold back. Tell us how you really feel. Not good to keep it bottled up.
“AMC says its new-found market capitalization, based on the idiotic price of its shares, is idiotic itself, dressed up in its CYA legalese…
The decisions makers in this deal are just ruthlessly taking advantage of people that are desperately eager to be ruthlessly taken advantage of, and that are willfully and eagerly participating in one of the grandest-ever pump-and-dump schemes, organized and coordinated in the social media, particularly on Reddit.”
revival of the memes :)
We are living in CryptoWorld. It’s like a rerun of the 1920s bucket shops that went down with the ’29 stock market crash. Next there will be clothing chain stores selling the Emperor’s New Clothes.
On the other hand, if China’s currency keeps increasing in value, the Chinese will be able to buy real US companies at garage sale prices, and that will keep the stock market pumping.
Whose going to buy all those Chinese products if their currency keeps increasing in value?
We are, we don’t make anything anymore….remember?
We will just issue more debt. I’m a Canadian but the same principle applies.
We have houses to export to Chinese so we are good.
They aren’t making more movie theaters?
It’s one thing if you’re buying what you think is a company
with earnings and all that. But in this case, why would
you need to warn anyone.
While Captain Powell of the Titanic fiddles with SPV’s, QE, ZIRP with dreams of igniting inflation for the the Little People like he has for asset holders, others are at least a bit more connected to reality and more concerned about how do stuff like create jobs and produce things folks want:
TAIPEI — China now boasts more Apple suppliers than any other country, a sign that Washington’s attempt to untangle U.S. and Chinese supply chains has had little impact on the world’s most valuable tech company.
Of Apple’s top 200 suppliers in 2020, 51 were based in China, including Hong Kong, according to a Nikkei Asia analysis of the Apple Supplier List released last week, up from 42 in 2018 and knocking Taiwan out of the top spot for the first time. Apple did not release data for 2019.
Well, the nice thing about the Apple Hipster Delusion is that once people start waking up to the fact that they are paying 5x to 20x too much for an Apple phone relative to an Android phone…the world can change pretty quickly.
Shhhh…don’t tell the hipsters. I am using a $20 Samsung running on Tracfone. I do more than most millennials do on their $1600 iPhones on $100/mo plans.
iPhone se is $300…
Spot on C127
When Google at Trump’s behest made it difficult for Huawei to access the app store a few months back, Huawei sales took a big hit.
Surprise, surprise Huawei are now {yeah that quick)rolling out their own OS for phones. 3 now to choose from! If Huawei turns out to be good, like everything else they ever did, 2 co’s are going to lose 33% of sales.
At what point do you guys get yourselves some clever politicians?
Android app store to be clear
Taipei is in Taiwan….
Taipei is where the article was published.
It’s really kind of sad. Ultimately, billions of dollars are going to be transferred from newly minted degenerate gamblers who mostly don’t even realize the degree to which it is gambling with a huge house advantage.
And they’re naive enough to think they’re sticking to the hedge funds while in truth it’s the exact opposite – the HFTs are preying on them an siphoning off huge sums. This extreme volatility is an absolute gold mine. I have little doubt that the surges aren’t even caused by WSB crowd – they get it started, the hedge funds see the opportunity, jump on board and help drive up the price until retail demand is frothy. Then the hedge funds can quietly sell its (massive) holdings near the peak to all the late-arriving retail bag-holders. Once the hedge fund buy demand is gone the price either drifts lower or crashes lower. Rinse, repeat.
There’s no way the volume of movement are all driven by retailer traders. Although highly likely they are the majority buying high thinking they will make a quick buck or give the finger to the system. Everyone likes that image of being a rebel amongst rebels that all think alike. I can’t believe the media is still pushing the narrative but guess it makes sense to lure more fools on before the train derails.
Most people don’t even know about dark pools. They think the market all set trading hours and fair as if everyone higher up played by the same rules. That the ticker price must be true and accurate–it says so!
The best thing is simply to not partake. You don’t gain but you also don’t lose. No one needs to fear missing out being fleeced by everyone including those who told you to buy and stick it to the man. Just as pyramid schemes exist and those neck-deep nuts ruin close relationships just for some cheap money, what do you think total strangers care about the welfare of others? Easy prey.
As Adam from Wealthion said….”these money goes to Money heaven..”
Hedge funds like sharks eat the sardines ate u the sardine
Every blog seems to have that guy who says the same thing over and over no matter what the post is about. Typically it’s something like “this won’t end well” “gonna pop soon” “I’m stockpiling cash and getting ready to buy when it all collapses” etc. Sure seems like all of those comments and more are very close to coming true. There’s nothing backing any of this but a bunch of pieces of useless paper.
It will be over when banks get hacked your assets gone hum great reset
Good point. IF the big banks get hit by one of these Ransomware and wipeout the files. Then what??
Then banks will have to use their data backups they have been paying for so much to maintain over the years. There are many ways to isolate backups from the computers that are being used and there are many ways to protect the backups.
If you look who has gotten hit, it has been companies that thought they didn’t need to take computer security seriously: an ancient pipeline network, a Brazilian-owned meat packer, a ferry company, etc.
Computer security at banks is in a different ballpark entirely.
Can’t hack what you don’t have access to. People don’t understand it but you can run raid array servers independent of any network. Then have a knowledgeable guy do manual and secure backups. It’s not necessarily a server technically but it can be a data store backup. A simple server rack without any intranet or internet connectivity and 2-3k worth of basic hard drives in a raid format 6 iirc would be nearly foolproof and could host and service all of a banks branch’s users. You can also work some magic and skills with networking to make simple data storage nearly invulnerable.
The overwhelmingly vast majority of these cyber attacks are phishing, direct access, or someone using idiotic passwords and poor opsec. So it is the people as the issue. Some goober picking up a USB drive in a parking lot and plugging it into a work computer or an 80 year old secretary answering emails about her social security number being suspended.
Anybody working in IT or security can tell you the issue is in getting people to not be stupid. You can build a better vault but there will always be a better idiot out there. Besides I don’t see much point in deleting the balance of the masses and stealing it would be rather difficult and require quite a massive conspiracy for laundering and making the money useful. Targeted attacks outside of banking are probably much more lucrative and easier to pull off.
Why try and loot Wells Fargo if you can just spend some money on Reddit and YouTube to advertise a pump n dump scam and clear millions legally? Or just buy an email mailing list and make a quicky fake website where you have people willingly give you their credit card information and swindle 20-30 bucks a head. Easier to take a dollar from a million than to take a million dollars from one. Just my take.
If someone do want to crash the banking system by wipe out al banking system files they will likely have success. But it will be a crash where no one get any money out of it. It will only be a grinding halt where the banking system come to a full stop.
Backups? Of no use, if the hackers have planned for that. Access and inside cooperation may be necessary, or at least an advantage.
Just a word of warning. Don’t leave your backup device like a memory card, Zip drive, or Thumb drive in your computer while you’re on the Internet. I did and got hit by Cryptolocker, which not only took out all my hard disk photo files but my backup as well. Lost all my vacation photos. Luckily that was all. Malwarebytes took out the virus and I was back up running again. Didn’t have to pay the ransom which they wanted in Bitcoin.
ND
Triplicate servers in multi-steel-door army defended solid rock under-mountain tunnels with every movement for miles around surveiled.
I could go on but I’ve run out of defence words.
Safer than the White House on recent experience.
Maybe your assets. The FED expects they will have to print off a few billion for ransom payoffs in these times.
Yawn. No problem.
If the Fed is serious about having inflation go up, maybe it should consider allowing each of the 50 states print their own currencies and back them with Fed generated USD.
50 is more than 1, right?
That would bring us back to around 1792.
They’ve been saying that for 50 years, ever since Nixon dropped the gold standard. Eventually they will be correct.
Of course, that may take another 50 years.
Do you really not see a difference between what happened from 1972 to 2008 and what has happened after that, and from 2020 on to an even larger degree?
Its all the same.
Saw a good scatter plot today of stock market values (profit adjusted PE10) vs inflation. Pretty nice bell curve scatter plot with highest valuations between inflation between 0 and 2%.
Of course we are at highest valuations ever (PE10 adjusted at 41) but inflation is drifting out of sweet spot for stocks. PE10 Adjusted has never been higher than about 15 when inflation hits 6%.
Let me add some more
Interest rates at 5000 year lows
Real Interest rates on Treasuries with an expiration of less than 5 years are ~ negative 1.5%
The Buffet index-total market cap/ gdp is at all time highs
The number of stocks with no earnings is at all time highs
How many of the popular phrases can I throw out about time like this? “This is the new normal..”, “The zoo has gone nuts..”, “Mental patients have taken over the asylum..” The stock market and quite a fair bit of the assets market is nothing but a joke courtesy of the FED and cheap money supply with no yield from traditional channels. Mix that with herd, FOMO and lemmings mentality, probably as dangerous of a cocktail as it gets.
If somehow FED pull a miracle and at least on surface create a level off optics rather than a crash then I guess people will build a shrine to worship and herald Weimar Powell as the savior, if it crash hard and biggest in recent in history, will they stick his head on a pike? My guess is no cause they sure didn’t do that to Greenspan. And make no mistake, the elites and insiders will come out ahead with either outcome. For AMC to go this far to warn people really goes to show WTF as Wolf like to use is really understating it, we need something better than WTF, an acronym we are not numb to..
Why stopped at 12Million shares?
Might as well sell a billion shares or 10 billions.
What a looney world — thanks the FED for all that “free money”
I haven’t heard much about the TGA account being run down lately. I believe sometime in June the TGA draw down will end.
I assume that the TGA account is where much of the stock market liquidity is coming from.
It’s likely yield curve control or some other new facility will be announced to counter any drops in the market. Why on earth would anyone at the Fed or politician want the stock market gravy train to end?
Update on the TGA at the end of last week:
https://wolfstreet.com/2021/05/27/fed-drains-485-billion-in-liquidity-from-market-via-reverse-repos-undoing-4-months-of-qe-even-as-qe-continues-total-assets-near-8-trillion/
TGA balance gets released weekly on Thursday. In a couple of hours, we’ll get the new number. Meanwhile, here is the most current until the new number comes out:
Dollar was strong today. Could be connected to Friday’s job numbers, but I wonder if there’s a correlation with the direction of the TGA.
Why on earth would anyone at the Fed or politician want the stock market gravy train to end?
because people would start asking why to work when you can make money by speculating/gambling on stock and why to work when government pay you to stay home.
end result of that is funny money like in Venezuela, Zimbabwe, Yugoslavia…
Yes Wolf – AMC are doing the right thing. To not take advantage of this idiocy is to risk bankruptcy which would be unfair on other stakeholders (employees, business partners, customers, bankers) and in a rather weird way would even be acting against the long term interests of the err… shareholders.
Normally I wouldn’t approve of a 2.5% fee for non-underwritten issues, but in this case it sounds reasonable. They might sell nothing and earn nothing.
Are they. Given they are an entertainment and CS company optics and customer loyalty is important. So AMC may still may not survive, however, a smart shareholder will certainly be better off. A planned last hoorah and cash grab by the executives?
I put in play money into WKHS yesterday. Up 40% today so I sold.
It’s insane out there folks.
WKHS looks to predate the meme stocks but did become roped in. It looks to have initially spiked from the Green New Deal talks and especially after Biden won. Then one more in February 2021 for the giggles I guess. As to why it dropped, who knows really.
Pity whoever bought at the peak of ~$40. Pity who also bought again at like $14 because they’re just getting played.
Poor Cinemark. Short % is just as high as AMC. I am guessing they are struggling too but they will not get any help with this made up short squeeze.
LOL. I notice Wanda, the Chinese company that bought AMC in 2012 has sold out all it shares on this squeeze.
LOL…..I bet 6 months ago they thought they were going to lose all of their investment in bankruptcy. The reddit APEs just bailed out a Chinese companies investment.
Also, if you read stocktwits, they all have Diamond Hands and will not sell.
Today, 584 million AMC shares were sold. Meaning that investors SOLD 584 million shares. Yesterday, investors SOLD 753 million AMC shares. Everyone and their dog was selling over the past few days. And of course, every single one of those shares that was sold, was bought by someone.
Let’s see…..Wanda is clear of the stock, AMC management just funded their golden handshake reserve account….what’s next to end this fiasco?
I bought a couple of june 16 @25 options on Cinemark for about 70 cents today. The stock is at $23 and has a short position % just as large as AMC.
I am hoping the reddits move over to CNK in the next week. If not, I am not out much.
MB
Good sale!
You didn’t think you would get another 40% minus expenses tomorrow?
It is unusual for a company to warn investors they may lose all their money in buying a new stock issue. I suppose they do not want to get sued.
Caveat emptor! AMC management may give themselves a raise.
I don’t think its all that unusual.
Have you read the WeWork prospectus or the financial statements from that deli in New Jersey that’s worth $100 million?
DH
In UK and EU it’s mandatory to warn of total loss in the prospectus of any market quoted financial instrument.
Trouble is, it comes in a 2inch thick book of warnings that would put any sane person off ever buying anything. UK has promised to get it down to a few pages post Brexit.
That’ll be a miracle.
I guess my phantasy is limited. I can’t imagine more madness, but I know it has no limits.
Social media multiplies conspiracy theories, hate and even stock prices.
Big problem in my opinion is professional money managers, politicians and Fed are all focused on short term results. These people’s long term focus is a day to two years max.
Genuine capitalism is all about making careful long term allocation of savings. A year doesn’t mean squat.
In my opinion the prospectus writers did a perfect job describing the risks and their underlying causes. It is interesting, people who buy and sell these stocks in the open market take these same risks every day, no doubt some through the same brokers who will be marketing this offering to them, but because it is an offering by the issuer these warnings must be given.
I’ve gotten the impression that folks here are big fans of the Fed, but is everything really because of monetary policy? What about the SEC and Congress itself? There was a tulip mania long before the Fed, and many financial panics while the gold standard was in use.
Maybe you missed it – the Fed built the house it was born in.
Irony is with the capital they raise they could probably buy a profitable business. Remember when Kodak got a generic drug contract? Those shares are $8, a premium to their price before the deal.
Kodak is not getting the generic drug contract. That deal is dead. And Kodak’s executives are being dragged before the court on charges of insider trading.
Ambrose,
Why buy a profitable business when you can add an unprofitable one, like streaming via an app? Then you can really get your customer base–I mean investor base–excited.
The point should be, sure Kodak is right back where they were, but the stock isn’t going back to those subterranean pre-hype levels. SHare price is well above the delisting mark of $5. Now after two failed business gambits, bitcoin mining and generic drugs, they will find something that fits, (probably). Take all this in the broader context. These are empty business frameworks looking for a product or service, and investors see the value in that, which is a positive on the macro scale (and if you are into spec I don’t think Kodak is what you buy). Investors are willing to pour money into AMC, which means someone thinks this is a working business model, and maybe it is. maybe movie theatres and FILM will make a nostalgic comeback? Sales of the 700hp ICE powered muscle car aren’t doing too badly.
Hahahahaha…. Just got this press release in my email — the promo train is going full speed (quoted in full below):
Can I resign my membership in the human race?
I think I read they are giving out popcorn to retail investors!
Brilliant. That will get them in the stock and the movie house…
Well, we ARE going to sit back and eat popcorn.
They will also do an extended showing of the Stocky Horror Show
A great day for capitalism I say!! I, Jay Powell, have created a masterpiece of modern monetary mania!!!!!! Hahhahahahahahahaha!!!!! Wait until you see my encore!
I heard that AMC is offering new investors a free large buttered popcorn and drink on their next visit to one of their theaters. The lemmings are lining up, jumping in and hoping for another Gamestop short squeeze
Thursday June 2, 2021, I saw a single order to buy 900 contracts of AMC, yes 900 contracts, way above the bid price. Whoever bought those contracts paid without even blinking, they must have been bleeding pretty bad. This had to be an institution that was desperately trying to cover a huge short position.
Correction: June 3, 2021
The AMC saga won’t end until the hedge funds figure out how to close out all the shorts they placed earlier on the year. Unless they can buy shares for $5 or less they will lose big bucks. So they short synthetic shares and ladder trade the stock down at night hoping for a miracle.
The popular sentiment assumption is that there’s a short squeeze everywhere so buy buy buy and wait. With the sheer amount of volume in some of these stocks since the early days before mainstream attention, it may not be true since the initial days. New shorts, new bag holders, the bigger players are playing the margins and momentum.
It does keep a narrative going though and greater fools entering the arena. What better buyers than self-righteous crusaders who will drop money no matter the price and hold to prove a meager point? Like how some donate lavishly to Twitch streamers, so do they burn money in the markets without a care.
The market can remain irrational longer than you can remain solvent.
–John Maynard Keynes
“The market can remain irrational longer and this will be the new normal. Shut up and take it like a man!”
Jerome “Weimar” Powell
“What better buyers than self-righteous crusaders who will drop money no matter the price and hold to prove a meager point? ”
They may hurt one or two hedge funds with the squeeze but lots of others are jumping on board and probably making more money that all the reddits. FYI….Bill Gross made $10 million in that GME run up
Correct. One hedge fund went down and got bought or absorbed by someone else. A bunch made off with opportune billions. Some people who bought GME cheap early hopefully cashed out, a lot of everyday suckers are holding empty bags. No matter what you think about any of this, if you’ve bought and holding at $400 per share and it’s $258 then and still now, you got played. Gamestop is not going to pay those dividends ever.
Maybe it’s just stimulus money to some and thus disposable but it’s not “hurting” any bad guy as intended. If anything this will just make trading much harder in the future as they clamp down on who can do what freely.
Did AMC sell some shartes to the SPAC MUDS last friday. MUDS turned abound and sold them this week. I wonder if this whole arrangement was to sell to HF that needed to cover some shorts.
Wolf, how is your short, or shorts, position going?
Getting a bit long in the tooth :-]
I am going to give you a little history lesson in the form of a personal story.When I owned a seat on the American stock exchange trading options, I had a friend who had a masters in statistics from MIT . He joined the exchange in 1982 and by Oct, 1987 had accumulated over 25 million$.
I had a conversation with him in early Oct, 1987.we discussed out positions and I remarked that he seemed to taking substantial risks.He said that he was hedged and could only lose if the market had a substantial dramatic correction. Well on black Monday the market had that substantial correction and he lost all of the money that he had made plus some.
My point
The correction will be violent and happen in a short period of time . Trillions will be wiped out and the market will never recover
“The correction will be violent and happen in a short period of time . Trillions will be wiped out and the market will never recover”
In other words, it’s not different this time.
Disagree with this. The authorities now are more prepared than before. There’s also circuit breakers. If the market declines by X amount, they’ll just close the stock market.
What I love hearing is the bitcoin investment crowd talking about “diversification” Its hilarious. You have people who are otherwise relatively conservative investors, jumping into an “asset” that is only worth something because a greater fool is willing to pay you more for it. Those same investors would never buy say the Japanese Yen on the theory of diversification of their portfolio, yet we have gotten to the point where this crazy train in crypto and everything else has gone on for so long that everyone is now getting sucked down the rabbit hole. I see the same thing with real estate. People who have held off buying for the last 3 years are throwing in the towel and buying because there is seemingly no end to the crazy 10+% annual increases in prices. To me this all screams that we are at the top of the mountain and about to ride down, but then it seemed that way last year too.
Anton, assuming you have a job, are you not exchanging your valuable time and energy for some questionable paper with American presidents on it?
About that green paper with presidents….
I can use it at the gas station, grocery store, clothing store, electric company…..anywhere.
As a medium of exchange it is unparalleled in efficiency.
Crypto……not so much.
That green paper is also backed by the US government and it’s ability to levy taxes. Bitcoin? Nothing. Not saying it doesn’t have a place in the future but as an “investment” vehicle, it’s hardly better than Vegas.
That may be the mainstream crowd. Originally Bitcoin was about decentralization but it seems everyone wants to be reassured of their gains in dollars. So it’s kind of pointless as a “currency” as the only real purpose is mine, speculate, and cash out in dollars or whatever preferred currency. Would you accept Bitcoin if over the weekend it drops $4,000? The customer paid the right amount originally but in your possession it just lost value. Could you pay your suppliers if it drops another $4,000 between Monday and Thursday? From $40,000 to $32,000. Say that was a house at $400,000–you just lost $80,000. The practical currency part is just dead.
It’s a good story for gullible millennials and younger who like sticking to boomers. Let them live our their fantasy as they stay locked up inside and free of real social interaction probably for the foreseen future as all of them work from home talking to an app. The blockchain technology has a future, the talking points about decentralized money and alternative structures valid, but the execution is poor. This incantation needs a lot of work and it seems it’ll only get minds thinking about better once it bottoms out. Just hope a lot of people don’t lose it all in the collapse.
The real fear is the BRIC (Brazil, Russia, India and China) settling on a digital currency. One in which they can eliminate US Banking. That will cause some real headache for Washington. When they can trade sans USD then we are not in the middle and can’t disrupt via sanctions and the like
ND
Today at the St Petersburg conference Vlad said words, to the effect that, USA could not play fast and loose with the $ and expect other countries to respect it as a reserve currency.
Live translated on RT(UK) news
Interesting summary of cost increases in new home construction up 61% since 2019 according to this builder:
https://www.bloomberg.com/graphics/2021-us-housing-construction-costs/
It seems like, one by one, the investment “greats” are warming up to the idea of bitcoin as an insurance policy. I see these headlines saying that Ray Dalio “has some bitcoin”, Scott Minerd thinks bitcoin “should be worth $600k” (granted, he just did a flip-flop and is calling it a bubble), and when I listened to an April interview of Jeffrey Gundlach, he now recommends a 5% allocation to bitcoin as an insurance policy, just in time for a 50% crash in price.
When I discussed the Angry Trade in earlier comment sections (buying USTs with leverage), I noted that Gundlach recommended a 25% allocation to long-dated treasury bonds during the latter half of 2020. So in April, he dropped that number of 10%. He became more bearish on the the 30 year bond just after it sold off. There’s no better contrarian buy signal, so I doubled down on the trade earlier than planned.
It’s amazing how consistently market commentators get it completely wrong. The Reddit silver squeeze started when silver was already in the high 20’s. The Reddit crowd hates CPM’s Jeffrey Christian because he doesn’t support their silver conspiracy theories, but even Christian is saying the floor on silver is $22/oz and the bull market will resume later this year and silver will hit all time highs again. The folks at McAlvaney are also convinced the dollar will break down and precious metals will go higher from here. Everyone thinks that when the price of precious metals drops in the face of out-of-control government spending, the market is being irrational. I don’t disagree that it’s irrational, I just think it’s irrational to think that the entire market will act irrationally, but your favorite investment is going to act rationally. I read through random comments by the Reddit apes and their average IQ seems to be on the low side.
I don’t understand why corporations can’t use their clout to issue their own cryptocurrencies. Why can’t AMC issue AMCcoin? It doesn’t cost much to make up your own coin and maybe they could give you a free AMCcoin for every share of AMC that you buy, so even if the company fails, they might still succeed as a cryptocurrency. Double your chances. Great deal! And why does Elon pump up Dogecoin instead of making his own MuskCoin or TeslaCoin? Buy a Tesla, get 1000 MuskCoins completely free! I’m not trying to be sarcastic, I really don’t get cryptocurrencies, and I am truly puzzled by these questions. Maybe this would be the way for bitcoin haters to crash the crypto market. If your local supermarket and auto repair shop start offering you free crypto, maybe people will realize that they’re worth a dime a dozen, or nothing at all.
Crypto has a market for the same reason there is a Las Vegas and most states have a lottery. Someone is making money off of people liking to gamble.
OS
UK Building Societies are to offer lottery prizes instead of worthless interest payouts to compete with Govt premium bonds and the National Lottery!
I’ve always said our taxes should also be paid on a lottery basis with payers names drawn out of a hat every year but they never listen.
Be interesting to see the reaction to Tesla’s inevitable unavoidable next trip to the stock market.
The thing that makes me mad is if someone like me had shorted AMC they way the hedge funds did, and had the price blew up like this they would have already taken every dollar I have for failure to close. If we had a fair market the hedgies who got caught in this short sale would be on the street with nothing but a pocket knife and a can of soup.
Conspiracy. Brokers protect themselves. If their clients are at liquidation risk (from being g short etc) they force a margin call. Maybe some fund somewhere is still short AMC at 5 dollars. As long as the broker is satisfies with fund’s posted collateral, the fund is free to baghold their losing short. Most funds will close out a losing short and establish a short at a higher strike (better entry). They might even play the ride up as a hedge. This volume is not retail.
They are applying crypto trading strategies to the stock market and it’s working for now. When this whole thing ends there will be a lot of bag holders and most of them will be the small/retail investor.
I agree the Fed has enabled this ridiculous behavior but I think we are getting to the point that the government cannot service it’s debt with higher interest rates. That is why the Fed is saying there is transitory inflation and they are going to let it run hot. The fact of the matter there is no Volcker and they do not have the tools to control inflation.
Chicken and egg. Yes, the government can’t service its debt with higher interest rates (and for that matter, neither can corporate America), but the debt levels are what they are in large part due to the Fed.
Neoliberalism.
What could possibly go wrong?
Do you remember last time?
What last time?
This is new.
The economics underneath isn’t, and it’s still got its old problems.
At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.
The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth.
1929 – Wakey, wakey time
The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth, but it didn’t.
It didn’t then, and it doesn’t now.
Oh blimey!
It’s all coming back to me now.
We never were creating wealth, just a ponzi scheme of inflated asset prices.
Putting a new wrapper around old economics did fool global elites.
You’d have to get up pretty early in the morning to catch me out.
A 1929 liquidity crisis is about as likely as a FED punchbowl shortage.
When earnings yield in the stock market exceeds yield in the bond market, you have better returns in stocks.
Who created that situation? The people who repressed yields, a/k/a the Fed.
BTW the “elites” weren’t fooled. They pushed for it.
The economic “fuel,” the economic activity that funded the speculation that ended in the crash of ’29 and the long depression following, was based on and fueled by the formation & consolidation of the wealth of our nation under a new type of aristocracy, a corporate-industrial aristocracy, which was based on the monolopy of this last untapped continent’s substantial, unparalleled natural (and human) resources.
That’s what was so concentrated, levereged so highly, and blew up so throughly, in ’29.
This last fifty years of speculative expansion, its, “ponzi fuel,” more precisely, its funding base, has been based on moving the wealth of the American industrial middle-class back to the industrial corporate class (to a situation a la pre-WWII, pre-29), through the last fifty year’s shared policy of both political parties, of offshoring industry complimenting a internal labor dilution through massive immigration.
That vast flow of capital generated by dismantling our industrial middle class been the, “seed,” funding for the past 50 years of speculative expansion, then turbocharged by the, “tech,” revolution, all funded by the underlying massive transferring of the wealth of the middle-class directly to the top over the last fifty years of immigration and offshoring.
2007 marks the moment when this cash cow, the American middle-class, was finally drained dry:
The wealth of the middle-class had been transferred to the top, and leveraged to the max, and it popped.
The former foundation of the American economy, being the market demand generated by the earning power of the middle-class, by 2007 had slipped far below what’s necessary to support those, and now these speculative pricing levels. Thus the stimulus, the ever-expanding expansion of debt to maintain, “growth,” in a system that fuels its expansion by consuming its own foundation, its own seed stock.
We made our choices a long time ago, and it now appears the question is how far will our most powerful players go to maintain the policies that brought them the power and wealth of their positions.
It appears we are close to the point we’ve destroyed the basis of not just a stable economy, but have also broke the fundamental bonds of mutual certanity that our trust and shared values are capable of regulating the greed and desires seperating us.
Have these long economic policies already broken not only the economic bonds that hold peoples and countries together, but have broken our social cohesion to the point we are only waiting for the markets to implode, publicly announce the divorce?
I blame the SEC as much as the FRD
Maybe SEC should hire some reddit trolls to continuously post AMC investing disclaimers?
– if you want to blame anyone then blame a figure called “Mr. Margin”. Margin debt has gone through the roof in the last say 12 months. And all that margin debt has been provided by the commercial banks, NOT the FED.
– People are still blinded by the rising stock market. It’s the infamous “buy the dip” attitude.
So the Fed does not back up the commercial banks? With unlimited repro, With QE. Did you know the commercial banks own the Fed?
“These valuations reflect trading dynamics brought to you by the Fed. If you are unhappy with the results of your investment call 1800 FED JOKE”.
Did Monty Python buy the Fed? The Onion? The Babylon Bee? I need to know who to thank for all the hilarity.
You really have to give AMC’s management a lot of credit here. Most companies that got the “Reddit Runup” treatment in January weren’t prepared to capitalize on it. Gamestop could have wiped out all of their debt AND recapitalized to become an entirely new company if they had any inkling of the short squeeze that was about to happen… and considering all of the short sales quite frankly they SHOULD have been prepared for a short squeeze.
AMC’s leadership clearly put this plan into place in case there was ever an opportunity for a “do-over.” Maybe they had some smart investment bankers who pitched this idea to them. Whatever… someone clearly had their thinking caps on to pull this off on such short notice.
AMC probably had all the paper forms filled out ahead of time for the offering.
I am sure that they did… there were probably some blocks on the paperwork that needed to be filled in with current information (latest stock prices, etc.) but this was ready to go as soon as management pulled the trigger.
The news that came out after Wolf’s post is that AMC sold all eleven million shares in just three hours yesterday. Average price $50 or higher. None of this happened by accident.
This might catch this attention to you there in the US. Here in Canada I am hearing that there could be annual income taxes on stock market, real estate gains, value appreciation.
Right now in Canada, you only pay capital gains taxes on stocks, equities, ETF’s, mutual funds, REIT’s, bitcoin, cryptocurrencies etc. when it is sold, transferred or on the death of the investor. I assume it is the same in the US as in many countries.
Who knows Biden, democrats might want to start taxing every year by putting an income tax on stocks, equities, ETF’s, mutual funds, REIT’s, bitcoin, cryptocurrencies etc. Why wait years maybe decades to get their tax money when they can get it every year by using the value end year by December-31 or whatever date they like. This could really impact stock, real estate value if this really happens.
I just read a few minutes ago AMC wants to sell another 25 million shares.
Last week AMC sold 8 .5 million for 230 million cash to MUD (Murdock Fund)
I am not sure if this 25 million is on top of the 11 million that was mentioned earlier
Great idea. The stock was going to struggle and maybe go bankrupt with all the debt it took on buying up theaters pre-covid. What do you have to lose.
Yes, my understanding is that the new share offering will be on top of the 11.5 million share offering. They’re trying to completely recapitalize the company at these insane prices. Makes perfect sense. AMC’s business will never come back where it used to be, and it used to be tough already. So they’re piling up cash to pay off some of their debts and be able to digest current and future losses. It’s a great survival strategy, from the company’s point of view.
The reddits are clueless: Post on stocktwits:
$AMC to $500. GME took off from the price range in which
$AMC is currently and has never come back. Everyone had the opportunity to buy the dip today.
GME only has 60 million shares so when it hit $340 in its squeeze the market cap was about $22 billion. AMC (453 million shares) at a price of $60 has a market cap of $27 billion and this guy thinks it will go to $500 which would give it a market cap of $220 billion. Bigger that AT&T, VZ, Netflix yet AMC would have about $3.5 billion in sales when things pick up again. LOL
the 1st paragraph was the post. Mine comment was the 2nd paragraph. Better yet, the guy had over 15 likes. Crazy
I need to follow that guy on stocktwits and short what ever he buys.
After the actions this week,AMC now has over 513m shares outstanding.At 500 the market cap would be 265b $
I have a question for all of you. Suppose that you were the CEO of a public ally traded company with large debts and marginal prospects in the future. Now suppose that this company could sell stock at a such a high price that it would be equivalent to raising money at negative interest rates and you could use this money to retire some of the companies bonds with a coupon a rate above 10%.
Would this be a financially prudent thing to do?
I would do it because I’m reckless and live to fight another day, plus I can smell the compensation from here. Now riddle me this…
If you were a first time home buyer in Kansas and the state gave you a $7500 grant to pay closing cost, would you offer $50K over asking price, because the closing costs are really low, and you can use some of the money to buy down your rate from 4.5% to 2.5%?
Apparently you would, because the difference in P&I between the two rates is ~$50K. But is it prudent to take on $50K more in debt?
How can you buy down your rate?
You pay the bank a fee to lower your rate. Could be somewhere between $1K-$2K per percentage point. Usually they don’t offer more than 2 points per mortgage. Only available on conventional mortgages, as far as I know.
If you were a quality CEO you would have never let yourself get into such an over indebted position in the first place. You would have stopped putting good money after bad and shrunk the business and adapted to the new world a long time ago.
A CEO is getting paid to operate the company for the long term interest of stockholders, both old and new.
The 15% minimum tax proposal today would provide the Treasury about $140 billion over 10 years, while the broader 28% tax rate would provide $700 billion Thus Wall Street and Corporate America got a $560 billion dollar win today, so AMC and the Fed are not the only jokers on Wall Street.
And as the Fed, corporate America, and reddit warriors worry about getting the SP500 up another 19% to the magically delicious 5,000 level, Bloomberg warms today that people will be literally starving due the monetary madness. Perhaps the next round of stimulus can include a box of twinkies, along with $2000 per person to buy mooor AMC lotto tickets…LOL
Per Bloomberg:
A United Nations gauge of world food costs climbed for a 12th straight month in May, its longest stretch in a decade. The continued advance risks accelerating broader inflation, complicating central banks efforts to provide more stimulus.
The intelligent folks from Harvard will probably starve more folks than they will save with net zero 2050 goal. You don’t do anything in a vacuum in economics. Always ripple affects and unintended consequences of every policy.
Pimp & Dumb is a better term for what’s happening there…
No shame on AMC for stepping up to take advantage of this craziness. Who knows, maybe it can do something more worthwhile with the capital than those parting with it would.
“But it does show how ridiculous the entire stock market has become, thank you halleluiah to the Fed and its grandest ever shenanigans.”
The FED is a miserable, disgusting entity – a grotesque leech feeding upon society – which needs to be terminated.
– ” It will be able to tell stiffed plaintiffs: “We told you so.”
They count on trading bots being unable to interpret such an unexpected text.
So, Americans spend over 1 year trapped on their couches staring at screens only to finally! Finally! be free to go outside again! and the first, very first, thing they do is rush in giant herds to another building with a much larger screen that they can sit and stare at… I have never been prouder of my people than I am now. God Bless.
– Tom Marvolo Riddle is my spirit animal <l :D
An invisible statue just sold for $18K.
Says it all.
Just read the level in the NFT craze:
“Italian Artist Sells Invisible Sculpture For $18,000”
This is great stuff! Insure it and then report it stolen.
Ha! Reminds me of the urban legend of the guy who insured his expensive cigars against fire.
Matt Levine at Bloomberg has been all over AMC, almost every day this week. That’s basically his line, the world is insane, AMC is doing the rational thing though. And they have. Their CEO is doing good stewardship for the company, and being able to raise capital like this certainly might save AMC, which was staring into the abyss at this time last year. IDK. I hope it works out for them and they can put all that capital to good use, make the necessary reforms, and stay in business for many years.
I just don’t see myself as a buyer, even at half the price. I keep kicking myself for not buying AAPL or AMZN in the 1998-2005 date range. But those were very different companies. Adam Aron is doing the right thing by AMC but he’s no Jeff Bezos.
The stock price for AMC is what it is for 1 reason…the retail investors (redditt) believe the hedge funds HAVE NOT COVERED their short positions. There is ample DD out there that suggests there is at least a greater than 50% chance this is true. Only the late comers with FOMO will lose in this scenario. Most of retail are up 5X or more with AMC as of todays price.
I love watching the “professionals” act shocked, speechless or exacerbated with this ShtShow when in fact it’s a mirror image of the entire DOW, S&P and NASDAQ that has had “professionals” scratching their heads (like me) for 15 years wondering wtf is going on. Fundamentals? Please!
How this would play in the UK:-
The punters would lose their cash in the crash. There would be a huge scandal all over the media saying the poor folks got ‘scammed’. They would demand compensation, The Company would quote it’s warnings prior to float.
Punters and media would go to Govt claiming ‘excessive’ small print would not be read by an ‘amateur’ investor.
Govt says, of course, sorry we’ll give you your money back. Never fails here!