Fails to deliver in shares of AMC Entertainment Holdings, Inc. passed 1.3 million in the latest SEC report. In nearly a year of reporting on this, this is one of the highest figures I’ve seen.
Fails to deliver hit 1,327,129 on March 23. They settled at 103,223 at the end of March, the last date for which information is available.
Even that is an exceptionally high level compared to other stocks.
AMC sometimes does a lot of volume, so we should correct for that.
Let’s compare the fails to deliver and number of shares traded for AMC and a few major stocks. Below, I use volume data from Yahoo! Finance.
Here are the numbers for March 23:
|Stock||Fails to Deliver||Volume||% Failed|
If you look at another day, the numbers change a little, but the overall picture remains the same. AMC has far more trades failing to clear than other stocks, both in absolute number and as a percentage of shares traded.
Why are so many AMC trades failing to clear? In stocks with a persistent pattern of fails to deliver, such as AMC, naked short selling is a common culprit.
Naked short selling is the mostly illegal practice of selling short shares you did not borrow first. Later, the trade fails because the shares never existed in the first place!
This is a powerful way to push down a stock’s price. If you need not find shares to borrow, you can sell short as many as you like, putting the stock under pressure.
Moreover, the SEC fails to deliver numbers may be an undercount.
Once a trade has been failed for an extended period, the Depository Trust & Clearing Corporation (DTCC) puts it an “obligation warehouse.” Once the trade is there, it effectively disappears.
I suspect hedge funds are using naked short sales to manipulate the price of this popular stock. And the DTCC is making it easy for them by wiping their obligations.
To me, the only real question is, how long will they be allowed to get away with it?
Why do you think AMC fails to deliver are so high? Leave a comment at the bottom and let your voice be heard!
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