Looking at YouTube comments, Reddit, etc recently I sense a lot of fear in the community. So I thought I would share my very simple outlook on it and hopefully people can rest a little easier for it.
The AMC squeeze will happen. Why? Simple – “shorts are guaranteed future buyers” (thanks DFV for the quote). The only possible outcome where they would not be required to buy back the shares is to drive amc to bankruptcy. That is no longer possible. As such they are required to buy back the shares. Therefore the squeeze is on.
So what’s taking so long? The answer lies in one of the primary functions of the market – price discovery. Simply put, nobody knows what the fair price of an AMC share should be right now as dictated by supply and demand. Broadly speaking, retail investors believe it should be higher and hedge funds think it should be lower. The process of price discovery has been an ongoing tug of war between hedge funds and retail investors for 7 months. Take heart! When the price bounced off of 32 last week, Trey stated “I think we’ve found the floor”. If this is true (and I personally have much confidence in Treys analysis) then its an indicator that price discovery is almost complete. At the time of this post it seems that AMC stock is settling into equilibrium between 32 and 40. This is important because hedge funds are going to seek out the equilibrium price before they start closing positions (contrary to popular belief they do not have the power to lower the price at their whim). They will do this because they want to make sure they start buying back shares at the best price they can get. (Remember that not buying them back isn’t an option for them anymore because amc isn’t going bankrupt). Once the price discovery process is complete hedge funds will be incentivized to start closing their short positions. Then we print tendies. All we have to do is wait and continue providing as much buying pressure as possible.
Of course there are other factors at play also, such as the latest NSCC filings: 803, 010, 014, and 011. We have no insight into whether these will be a factor in the timing of the squeeze, but it is certainly possible.
Finally, there is a mind boggling amount of wild speculation flying around the community at present. Remember Occam’s razor: the simplest answer is usually the correct one. We buy, we hold, we wait for them to start closing their shorts. Because they will. They have to. They can’t keep underwater positions on their balance sheets forever.
I hope this message helps apes to keep their sanity in this crazy play.