According to Fintel, there are zero shares of AMC Entertainment (NYSE:AMC) left to short at the time of writing. Yesterday, the number of shares available to short hovered around 10,000. At the same time, the cost to borrow (CTB) fee for AMC stock has increased to a significant 214.07%, up from 166.76% a week ago and 103.55% on March 13. Generally, a CTB above 10% is considered high, while a CTB above 20% is considered very high. Since March 13, shares of AMC are down by about 18%.
The CTB is the yearly fee that short sellers pay to borrow stock. The fee rises when short seller demand is high and falls in line with a decline in demand. A high CTB could also signal a scarcity of available short shares, which is exactly what is happening right now.
Available shares of AMC Stock to Short Falls to Zero
While a high CTB conveys high short seller demand, it can also be perceived as a positive for long shareholders. No short seller wants to pay 100% annual interest for borrowed stock, much less 214%. In addition, a higher CTB lowers the chances that a short seller emerges profitable. This could ultimately influence the short seller to sell out of their position by buying the underlying stock. With zero shares available to short, and a high CTB fee, it’s apparent that short seller demand for AMC is high right now.
Meanwhile, the short sellers have quite a bit of ammo to use in their thesis. Earlier this month, shareholders of AMC and AMC Entertainment Preferred Equity Units (NYSE:APE) voted in favor to approve a reverse stock split and an increase in authorized shares for AMC. The approval of these two proposals will allow AMC to convert all shares of APE into AMC stock. Still, the conversion is pending on the hearing results of a preliminary injunction motion set for April 27. Through two putative stockholder class actions, shareholders argued that APE votes should have not been included to approve the two proposals.
Another bearish bite came from Citi, which resumed coverage of AMC yesterday with a $1.60 price target. Analyst Jason Bazinet believes that AMC would need to increase its share count by between 77% to 230% to pay off all of its debt.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.