Among the meme stocks most in focus right now, AMC Entertainment (NYSE:AMC) continues to see wild price swings. In fact, today’s 3.5% move to the downside is relatively muted for the cinema operator. Shares of AMC stock have often seen double-digit intraday swings in recent trading days as volatility in this name picks up.
For traders, speculators, and those using momentum strategies, this volatility can be a great thing. However, for most investors, volatility is equivalent to risk, meaning AMC stock is among the riskiest out there. This is reflected in the company’s options pricing.
However, another factor that’s recently been highlighted by those in the financial media is AMC’s Failures to Deliver numbers. A number of reports highlight the fact that failures to deliver amounted to approximately 70% of the entirety of August’s trading volume. That’s incredibly high and could be due to the extreme volatility seen in this name.
However, popular Fox TV personality Charles Payne has stoked this story, recently posting on X, formerly known as Twitter, about the issue. Let’s dive into what “failures to deliver” are and why this is intriguing for many investors right now.
AMC Stock Dips, but “Failures to Deliver” Data Stokes Interest in the Stock
According to recent reports, total failures to deliver in August for AMC stock came in at 264 million shares. That means that 264 million out of approximately 380 million shares that traded hands during the month of August were not able to be delivered back to brokerages. When a trader can’t return the shares they’ve borrowed, that indicates some market inefficiencies are at play, which is certainly the case with AMC stock right now.
Many AMC enthusiasts suggest that these failures to deliver must indicate there is naked short selling going on in the market right now. Naked short selling refers to a sophisticated and illegal strategy where institutional investors essentially create synthetic shares, allowing them to short more than the outstanding float at a given point in time. The existence of these synthetic shares can, theoretically, drive a stock much lower over periods of time, creating massive profits for short-sellers.
While there’s no indication this is the case, there’s obviously a narrative building, or at least some questions being raised. As noted by experts on failure to deliver issues, liquidity problems, system failures, and potential market manipulation could be driving these numbers. I have no idea what the driver of these failure to deliver numbers are. However, it’s clear to me that AMC is a company in trouble.
Accordingly, it’s easy for many speculators to ride a wave higher, but when the tide turns (as it has), that’s the way things can organically go — the market isn’t always manipulated, as many suggest.
On the date of publication, Chris MacDonald did not have (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.