It’s been a rough August. And it’s not over.
Short sellers in shares of AMC Entertainment Holdings have lost $653 million so far this month. From a new Bloomberg report:
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Investors betting against the most well-known meme stocks have lost about $1.65 billion this month after the shares soared in value, prompting a short squeeze.
AMC Entertainment Holdings Inc.’s 47% rally has pushed mark-to-market losses for short-sellers to $653 million, S3 Partners data show. Similar bets against Bed Bath & Beyond Inc. and GameStop Corp., which have surged 359% and 19%, respectively, in August, lost $1 billion combined.
Bets against meme stocks like AMC and GameStop blew up hedge fund Melvin Capital Management, among others. But like moths to the flame, short sellers seem drawn to losing more.
Many firms like Melvin heavily shorted multiple meme stocks. Rallies in several meme names at once multiplies their losses.
Shorting a heavily shorted company is a recipe for a short squeeze. Add a fanatical retail following, and disaster could strike at any moment.
The ideal short sale candidate is a failing company that isn’t heavily shorted. And you want something with no cult following.
Or better yet, follow the counsel of a hedge fund manager I had dinner with recently:
“Short selling is a great way to lose money.”
I guess some are learning. As for the rest, bon chance.
What do you think of short sellers recent losses? Leave a comment at the bottom and let me know!
More on markets:
AMC’s 9 Million Missing Shares
Is Melvin’s Gabe Plotkin Headed to Prison?
Shorts Having Their Worst Month Since January 2021
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