How the powers to be can destroy a stock!

AMC was trading between $4.00 and $6.00 for most of the past year... but in the end, the short selling hedge funds managed to make a killing on the backs of the "retail investor".

I used to own 100 shares of AMC. I sold it before the big dip and spend just over a $100 on some long calls in case the stock "squeezed". What I should have done was buy some put calls, knowing full well that it was much more likely that the whales would eventually win and the stock would crash.

So if you are an investor, you have become accustomed to the term "meme stock" and the idea of a "short squeeze". The idea was for large groups of retail (aka amateur) to buy a stock in companies that were thought to be in trouble.

Generally when a stock is in a lot of trouble, the big hedge funds will "short" the stock in order to make profits as the stock price falls. If enough whales short a stock, the pressure is overwhelming and the stock price can plummet. While they do not have to crash the stock down to bankruptcy levels to make a profit, obviously that is the ultimate goal.

But on the other side, you have a bunch of retail investors who buy up large portions of the stock on the way down and then simply hold. Not caring if the price goes up or down long term. If enough of the stock is held by people who are not selling, well that puts pressure in the opposite direction. Their strategy is to keep the stock at current price levels to pressure the short sellers into giving up as their cost to borrow on a short sale can become overwhelming. In fact, for AMC, the cost to borrow at one time was over 1000%. The idea is that when these shorts sellers are forced to buy back as holding becomes too expensive, and the retailers are not willing to sell at the current price, well then the price of the share can jump. Once one big whale decides to buy back all their short sales, the price will go up, prompting the next to buy back their shorts, all the while losing more and more money as the price goes up. They end up having to choose between paying enormous costs to hold or take a huge loss by buying back their shorted stocks. Once this momentum starts, well then it can be game over. GME (game stop) went from trading around $10/share to squeezing up to $300. AMC went from $5.00 to over $70 in the first squeeze.

The problem is that these squeezes can literally put a brokerage out of business and some of them are "too big to fail". AMC has been on something called the thresholds securities list over what is deemed to be an excessive "failure to deliver". Generally if a stock sits on this list form more than 10 days, the SEC will get involved and force some margin calls and try to clean things up. AMC has been sitting on the list for nearly 40 days in a row and there has been no action. Too big to fail?

Meanwhile, every time there is good AMC news (such as the big Barbie Oppenheimer weekend) the CEO of AMC jumps out with some sort of statement talking about bankruptcy or the need to raise cash. It's as if he wants his stock price to go down (not up).

Either way, the end result of all of this bankruptcy talk was a proposal to combine the AMC and APE stocks into one, do a 10-1 reverse stock split, and provide some allowance to sell some more stock to raise capital. This proposal had been put on hold by the judge who was tasked with approving it. That ruling almost pushed the stock to the edge of a squeeze. But after the stock went crazy after hours the day of that decision, the shorts were back at it doubling down on Monday and the stock never went much over $6.00 during normal hours. A modified proposal was approved a couple of weeks ago and the date was set to do the conversion today. This appears to have been "game over" for the squeeze.

After a week of the price going down, today the stock performed their 10-1 reverse stock split. Meaning an AMC stock holder now owns 1 stock for every 10 that they had owned. The stock is currently trading at $14.23 which is the equivalent to $1.43 in yesterday's market. That means if you held 10,000 shares of AMC (as many of these retail investors did) and that was worth $50,000 or so a couple of weeks ago. You now own 1000 shares at a little over $14.00. Easy to do the math.

People on Twitter/X are talking about losing their retirement funds, college funds, life savings, etc. I can only feel "so" sorry for them, given they are attempting to beat the professionals at their own game and betting their retirement, college funds, and life savings in the process. If you read that Tweet (or X or whatever) that is indicative of how these people think. They will ride it down to zero because they are not smart investors. Many of these people are holding since before the first squeeze. Meaning they never sold when the price was $60 or $70. They held out for more and it just never came, as they were listening to internet trolls saying the stock was going to hit the GME type highs of $100, $300, or even $1000. So imagine the guy with 10,000 shares who could have sold at one time for $70/share or $700,000. Now his stock is worth $14,000. Time to find that bridge to jump off, huh?

Yeah, I understand that it felt like everyone was working against them. AMC played games with providing APE stock to large investors to give them the voting shares to approve the 10-1 reverse split and conversion of APE into AMC. That meeting was not well advertised. The CEO seemed to have been in bed with the shorts at every step of the way. The SEC has provided no excuse or explanation as to why they allowed AMC to remain on the list as long as they have.

The only remaining hope for the retail investor is that these whales are still greedy and instead of pulling out and taking what will amount to a massive profit, that they will continue to short and possibly get caught in an after conversion squeeze. But I got to tell you, I don't believe that $70 (now $700) is in the cards. Even if they can get it from $14 to $70, that is no more than having it gone to $7.00 pre-split. The split, the dilution, and the room to breath that the big players now have seems impossible to overcome at this point.

Glad I got out when I did.