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Fails to deliver in shares of AMC Entertainment Holdings, Inc. surged in February, reaching over 500,000 in the latest data released yesterday by the SEC.
This compares to nearly 200,000 shares that failed to clear in the last report two weeks ago, itself a very high number.
AMC’s fails to deliver are completely out of line when compared with other stocks. Let’s look at the fails to deliver for some of the biggest stocks in the market at the end of the latest report:
Alphabet Inc: 0
Apple Inc: 21,410
Amazon.com Inc: 4,000
Microsoft Corp: 328,810
Tesla Inc: 143
Keep in mind that these stocks have market caps orders of magnitude larger than AMC’s.
And yet, this little theater company has more failed trades than all of them. Combined.
Why are so many trades failing? Sometimes trades fail for benign reasons, like clerical errors.
But when a stock has a prolonged pattern of huge fails to deliver, it often indicates naked short selling. This mostly illegal practice involves selling short shares you never borrowed.
The trade can’t clear because the shares never existed in the first place. And you can short an unlimited amount because you need not find shares to borrow.
This is a powerful way to push down a stock’s price.
I strongly suspect illegal naked shorting by hedge funds in AMC. But with the FBI and SEC circling, they’d better be careful.
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More on markets:
Melvin Capital Under Federal Investigation
How Solana Could Wipe Out Visa and MasterCard
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