AMC? Simple: a potent combination of bold risk-taking, clever gamesmanship, and strength in numbers. After having sent the market into a frenzy with their massive inflation of GameStop's share price, all signs point to AMC as one of several subsequent targets. The ramifications of their actions, like the share prices of their target stocks, are apt to skyrocket—perhaps all the way to the White House.
The subreddit r/WallStreetBets, like any subreddit, is an online forum where s with common interests can share and discuss information on a chosen topic, in this case: the stock market. When the nearly two million Redditors on WallStreetBets noticed hedge funds shorting GameStop, which is to say betting money that GameStop's share price will drop, they leveraged their massive hip by each buying GameStop stock to drive its price up. The result? GameStop's share price surged approximately 1800%, earning the bolder among them a pretty penny while costing hedge funds untold millions, sending the finance sector scrambling to pick up the pieces.
Having harnessed this earth-shaking power, WallStreetBets has identified several other stocks these hedge funds are shorting, attempting to replicate their GameStop success with companies like AMC. The theater chain makes for a good candidate precisely because of its uncertain future. Hedge funds believing the state of the movie exhibition industry to be in decline shorted the stock, and WallStreetBets has already begun buying en masse in an effort to raise its price. But just how does this process work, and will it yield the same astronomical results as before?
For those who haven't seen The Big Short in a while, short selling or "shorting" a stock involves borrowing it from its holder, immediately selling it at market price, waiting for its price to drop, then repurchasing it at the lower rate and giving it back to the original owner, taking the difference as profit. Put simply, it's a bet that the price will go down. Hedge fund managers frequently use this process to earn profits, but if the stock price goes up instead of down, they still have to resell back to the original owner, even if they're running a deficit. That's where GameStop — and now AMC — come in.
With Reddit s driving the prices of these stocks up, they're putting immense pressure on the hedge funds who are seeing their bets go far in the opposite direction. Powerful forces on Wall Street have already begun efforts to stem the bleeding, halting trading on the popular app RobinHood. This action has incurred outrage everywhere from WallStreetBets to Congress, as cries of hypocrisy are hurled between the classes.
It remains to be seen whether these de facto day traders turn AMC into the next GameStop, but the share price has already increased 400% in the mere hours since WallStreetBets put their plan in motion. With tempers high on either side of what's amounting to class warfare between rich brokers and the stymied masses, the Biden istration has already commented that they're monitoring the situation. Nevertheless, AMC appears to have an exciting road ahead of it, if an eventual return from the global pandemic wasn't enticing enough.
