AMC Fails to Deliver Pass 700,000 in New Report

Note: This is not financial advice.

Fails to deliver in shares of AMC Entertainment Holdings hit massive levels this month.

Failed trades peaked at over 700,000 shares, according to a report out this morning from the SEC. They remained in six figure territory for all but two days in the period, which covers the first half of August.


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This many failed trades is highly unusual for most stocks. Let’s zoom in on August 8th and compare AMC with some of the largest stocks in the market:

Alphabet (Google):: 22

Amazon: 533,744

Apple: 379,843

Microsoft: 0

Tesla: 49,705

AMC: 723,636

Keep in mind, these other companies are dramatically larger. But month after month, little old AMC has far more failed trades.

Fails to deliver can happen for benign reasons, like administrative errors. But why would such errors affect this stock way more than others, time and time again?

The more likely explanation is naked short selling. This involves selling short shares you never actually borrowed.

It’s a powerful weapon to push down a stock’s price.

You don’t have to find any shares to borrow. And you don’t have to pay any interest to borrow them!

This means you can sell short an unlimited number of shares. Awesome, right?

It’s illegal for a hedge fund to do this. But that may not stop them, especially given lax enforcement.

But perhaps the most incredible thing is that 723,636 may understate the number of trades that are failing.

The Depository Trust & Clearing Corporation (DTCC) puts failed trades that don’t resolve for a long period into an “obligation warehouse.” At that point, they essentially disappear.

Earlier this month, over 9 million shares worth of failed trades in AMC stock suddenly vanished.

Maybe the DTCC were busy beavers cleaning it all up. Or maybe they just swept them under the rug.

We won’t know until the DTCC and SEC offer transparency on what happens to failed trades.

Something tells me we’ll be waiting a while.

What do you think of the new SEC report? Leave a comment at the bottom and let me know!

More on markets:

AMC’s 9 Million Missing Shares

Morgan Stanley Investigation Spreads to Multiple Countries

Is Melvin’s Gabe Plotkin Headed to Prison?

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Photo: Melvin Capital founder Gabriel Plotkin

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