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Over 43 Million APE Shares Fail to Deliver — Market in Chaos

The market in AMC Entertainment Holdings Preferred Equity (APE) shares is a mess. Fails to deliver (FTDs) peaked at over 43 million shares last month, according to a report just out from the SEC.


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These new shares were issued last month by AMC and began trading on August 22. FTDs peaked at 43,438,257 shares two days later.

This represents over 8% of all shares outstanding. And it all happened in 3 days!

FTDs like this is beyond a mix-up. It’s a total market meltdown.

FTDs remained elevated through the end of the August reporting period. They settled at 5,635,854 on August 31, the last data available.

Let’s compare the FTDs on August 24th in APE shares with those of some of the biggest stocks in the market:

Amazon: 0

Apple: 395,929

Google: 113

Microsoft: 0

Tesla: 530

APE: 43,438,257

APE shares have dramatically more FTD’s than other, much larger stocks.

FTDs can sometimes happen for benign reasons, like clerical errors. But when there’s a sustained pattern of massive trade failures, it often indicates naked short selling.

This generally illegal practice involves selling short shares without borrowing them first. It’s a powerful way to push down a stock’s price.

If you don’t have to find shares to borrow or pay interest, you can sell short as many shares as you like! All that selling makes a stock’s price crater.

If naked short sellers are targeting APE, so far they seem to be winning. The stock is down 43% since its debut.

The NYSE and SEC must look into this market breakdown immediately. One in three trades failing is not a functional market.

What do you think of the huge FTD numbers in APE shares? Leave a comment at the bottom and let me know!

Have a great weekend everyone!

More on markets:

AMC Fails to Deliver Pass 700,000 in New Report

Hedge Fund Manager’s Arrest Shows How Market Manipulation Works

Morgan Stanley Investigation Spreads to Multiple Countries

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New Index Will Drive Demand for AMC, Other Meme Stocks

Note: This is not financial advice.

Robinhood Markets is launching a new index fund to track meme stocks. From a report that broke this morning in The Wall Street Journal:


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Robinhood Markets is launching an index to track the favorite stocks of its millions of predominantly young, social-media-savvy customers.

The brokerage firm’s new “Robinhood Investor Index” will track the performance of the 100 investments most popular among its user base. Initially, the top five stocks in the index will be Tesla , Apple, Amazon.com, Ford Motor and meme-stock favorite AMC Entertainment Holdings. Robinhood said it would update the composition of the index monthly, offering a view into its customers’ changing tastes.

In an unusual approach to constructing an index, Robinhood said it would weight stocks in the index by the “conviction” customers have in them, defined as the percentage of assets in a customer’s portfolio devoted to a particular stock.

The new index will increase demand for meme stocks, especially those weighted heavily like AMC and Tesla.

When a stock is included in an index like the S&P 500 for the first time, the price generally jumps. This is because so many index funds track the S&P 500.

When a stock is added to it, those funds must buy the stock. Similarly, when investors buy shares of the new Robinhood index, Robinhood must buy stocks like Tesla, AMC, etc.

This increases demand for those stocks.

Indeed, a McKinsey study found that stocks added to the S&P 500 jumped a median of 5%. But the increase was short-lived, disappearing in just 20 days on average.

The effect of inclusion in the Robinhood index is likely to be more modest, given that $5.4 trillion tracks the S&P and the Robinhood index is just getting off the ground. Still, I expect a modest tailwind for meme stocks from this change.

The Robinhood index is an interesting approach. It allows investors to profit from the “wisdom of the crowd,” following investors who have strong conviction about particular stocks.

If an investor is confident enough to put their entire portfolio into a single stock, maybe they know something I don’t.

I’ll be curious to see how the Robinhood index does against other index funds. And you can bet every broker is rushing to create a meme index as we speak.

What do you think of Robinhood’s new meme stock index fund? Leave a comment at the bottom and let me know!

Have a great weekend everybody! 👋

More on markets:

AMC Fails to Deliver Pass 700,000 in New Report

Morgan Stanley Investigation Spreads to Multiple Countries

Hedge Fund Manager’s Arrest Shows How Market Manipulation Works

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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

Why Hedge Funds May Pile into APE Shares

Note: This is not financial advice

This morning, new preferred shares of AMC Entertainment Holdings debuted on the New York Stock Exchange.


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Interestingly, the new shares (ticker symbol APE) have the same ownership interest and rights as normal AMC shares. But as I write this, they trade for $5.80, versus $10.52 for AMC shares.

The shares appear ripe for one of Wall Street’s favorite strategies: arbitrage.

If the two share types have the same economic value, they should trade at the same price. Hedge funds often buy an underpriced security while selling short an equivalent higher priced one.

The bet: the two prices will converge.

I expect hedge funds to buy APE shares while shorting AMC common stock. On paper the strategy makes sense, but there’s a little problem…

AMC shares are heavily shorted. 20% of the float has already been sold short.

If hedge funds continue shorting the stock, they become vulnerable to a short squeeze. Huge run-ups in shares of AMC, GameStop Corp. and others have bankrupted hedge funds before, such as Melvin Capital Management.

What’s more, both AMC and APE shares have passionate fanbases that can cause massive volatility. The human factor could cause a seemingly straightforward pairs trade to go very, very wrong.

Hedge funds should heed the lesson of Melvin Capital and avoid shorting volatile meme stocks. But as Benjamin Franklin said:

“Wise men don’t need advice. Fools won’t take it.”

How do you think hedge funds will react to the debut of APE shares? 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?

Wall Street Banks Turn on Each Other as Federal Probe Looms

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AMC Shorts Take $653 Million Loss in August

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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Is Melvin’s Gabe Plotkin Headed to Prison?

The SEC is investigating Melvin Capital Management for securities fraud. From a report that broke last night in The Wall Street Journal:


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The U.S. Securities and Exchange Commission is looking into Melvin Capital Management risk controls and investor disclosure after the hedge fund was crippled by the meme-stock rally last year, said people familiar with the matter.

The regulator has contacted investors in the hedge fund in recent months as part of an investigation into what Melvin founder Gabriel Plotkin and other senior executives told them following the meme-stock rally in January 2021 and whether it misled investors when it raised money last year.

If Plotkin and other top Melvin executives lied to investors in a fundraising presentation, they committed a very serious crime: securities fraud.

Securities fraud can be punishable by prison time, not to mention large fines. Of course, no one has proven anything yet against Plotkin or anyone at Melvin.

When Melvin raised money last year, it had already suffered massive losses. Its losses during the meme stock rally of January 2021 were $6.8 billion, or more than half its assets.

The worst days saw losses of over $1 billion. A day.

If you’re raising funds and fighting for survival in a situation like that, you might be tempted to stretch the truth.

We don’t yet know which fundraising presentations the SEC is looking into. But we do know that Melvin raised $2.75 billion last year from Citadel and Point72 Asset Management.

Did Melvin lie in those presentations in order to secure the bag?

When you rob mom and pop, it’s hard for the victim to fight back. But if you rob some of the richest and most sophisticated investors in the world, they can hire an army of lawyers to make your life very difficult.

This investigation comes on top of a DOJ probe into Melvin’s short sales. That investigation too could result in prison time for insider trading if wrongdoing is found.

In all, it’s not hard to see why Melvin shut down. It had lost a fortune, couldn’t get any more performance fees, and feds were circling.

I don’t know whether Melvin did anything wrong. But I do know that today, I’m glad I’m not Gabe Plotkin.

Do you think Melvin is guilty? Leave a comment at the bottom and let me know.

Have a great weekend everyone! 👋

More on markets:

Melvin Capital Under Federal Investigation

The Real Reasons Melvin Is Shutting Down: No Fat Fees and a Federal Investigation

AMC’s 9 Million Missing Shares

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Photo: Melvin Capital founder Gabriel Plotkin

Shorts Having Their Worst Month Since January 2021

Note: This is not financial advice.

Short sellers are having their worst month since January 2021. From a new Bloomberg report:

Somehow, the stock market’s worst first half in five decades has morphed into a slaughterhouse for short sellers.

More big lumps were felt Tuesday, when the S&P 500 rallied 2.8% and bearish traders suffered losses roughly double that.

About 98% of S&P 500 members advanced, the broadest rally since December 2018. The most-hated stocks jumped 5.5%, eventually delivering pain for bears who were forced to cover their positions to limit losses, going by a Goldman Sachs Group Inc. basket. With the most-shorted basket up 16% in July, the month is shaping up to be the worst for short sellers since the retail-driven squeeze in January 2021.


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Heavily shorted stocks have not run like this since meme stocks skyrocketed last January. Indeed, meme stocks are causing some of the biggest pain for shorts right now.

This tussle between the two sides of the investment world has continued this year, and fresh data from S3 Partners, LLC shows that between January and July 2022, AMC short sellers lost more than $1 billion in mark to market losses.

We’re in a bear market. This is not a great time to bet that stocks will go lower.

But hedge funds have piled in anyhow, betting against volatile stocks with cult followings. And again, they’ve taken major losses.

Perhaps some in the hedge fund world are beginning to learn their lesson. I had dinner with a bunch of hedge fund guys last month, and one said:

“Short selling is a great way to lose money.”

Now, short selling hedge funds may be forced to buy stock. They cannot fall too far behind their benchmarks.

Again from Bloomberg:

“Positioning had gotten very defensive as managers were anticipating additional downside. However, if the market rallies, then they are at risk of underperforming the broader market,” Freeman said. “Shorts are hurting their performance and they don’t have enough long exposure to keep up so they are forced to buy.”

Short sellers being forced to buy stocks to stem losses…this is the definition of a short squeeze.

I certainly don’t know if or when any stock will squeeze. But I do know I wouldn’t want to be on the other side of these trades.

What do you think is next for short sellers? Leave a comment at the bottom and let me know!

More on markets:

AMC Fails to Deliver Hit 9.7 Million

Wall Street Banks Turn on Each Other as Federal Probe Looms

New Law Could Put Big Short Sellers on the Endangered Species List

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AMC Fails to Deliver Hit 9.7 Million

In over a year reporting on this, I’ve never seen a number this big.

Fails to deliver in shares of AMC Entertainment Holdings Inc. hit nearly 9.7 million in June. The report, released today by the SEC, covers the second half of the month.


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The peak came on June 28, with 9,697,393 shares failing to clear. Fails to deliver settled at a still massive 1,907,897 at the end of the month.

So what are fails to deliver, anyway? A fail to deliver occurs when a trade is made but never completed.

Let’s say I agree to sell you 100 shares of AMC for $15.07 each. You want the shares and you’re happy with the price, so you agree.

Done deal right? Wrong.

I have to actually deliver the shares to you. When I fail to do that, that’s called a fail to deliver.

Fails to deliver often occur when traders engage in naked short selling. This generally illegal practice involves selling short shares without borrowing them first.

It’s a powerful way to push down a share’s price. If you can sell stock short without borrowing any, you can short any amount!

The market is flooded with sell orders and the share price dives. But the trades never get completed.

Instead, they show up on this report.

This is a truly incredible number of failed trades. Let’s zoom in on June 28th, the peak for fails to deliver.

Here’s how many fails to deliver some of the biggest stocks in the market had that day. This can give us an idea of what’s normal, even for far larger companies:

Alphabet Inc. (Google): 814

Apple Inc.: 28,223

Microsoft Corp.: 12,400

The biggest companies on earth have just a few trades not clearing. Meanwhile little old AMC has nearly 10 million.

Keep in mind, just because those fails to deliver dropped near the end of the month doesn’t mean the trades ever settled. The DTCC often puts trades that failed some time ago into an “obligation warehouse.”

After that, these failed trades disappear.

How can we have robust financial markets when the public doesn’t trust them? And how can the public trust markets when trades that affect share prices never actually happen?

It’s time for the SEC to investigate this issue vigorously.

Until then, we’ll just see more bogus trades pile up.

What do you think is causing these failed trades? Leave a comment at the bottom and let me know.

Have a great weekend everyone! 👋

More on markets:

Wall Street Banks Turn on Each Other as Federal Probe Looms

New Law Could Put Big Short Sellers on the Endangered Species List

Bill Ackman Loses $4.8 Billion

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Wall Street Banks Turn on Each Other as Federal Probe Looms

Morgan Stanley has been under federal investigation since February. Now, banks are turning on each other and unidentified sources are leaking information.

From a report that broke overnight in the Financial Times:

…according to reports, two of Morgan Stanley’s competitors, Credit Suisse and Goldman Sachs, have gone so far as to alert the US Attorney’s office and the Hong Kong regulator SFC, respectively, about “potential issues” around block trades executed by Morgan Stanley.


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The SEC and DOJ are investigating Morgan Stanley’s stock trading business.

Morgan frequently handles large “block trades” for institutional investors. There are allegations that it may have tipped off hedge funds to big sales that could move markets.

This would allow hedge funds to short the stock before the big block of shares is sold. Such a trade could offer quick, easy profits.

Why would Morgan do this? Because hedge funds are among the bank’s best clients.

Hedge funds have “prime brokerage” arrangements with big Wall Street banks like Morgan. Those trading accounts mean lots of juicy fees for the bank.

Let’s say you want to get or keep a lucrative customer. You might be tempted to give them valuable information, even if it’s illegal.

Nothing has been proven against Morgan yet. It’s possible that they were just conducting big trades in a straightforward and honest way.

But watching these big banks turn on each other gives me pause. I have rarely seen major banks reporting each other to regulators, as Goldman and Credit Suisse did with Morgan.

What’s more, Morgan has suspended some of its block trading staff. Why would they do that if they had done nothing wrong?

But it’s not just the big banks that are talking. Unidentified whistleblowers are also offering up information on possible wrongdoing at Morgan:

This noise goes well beyond the normal thrust-and-parry of a hyper-competitive business. Visceral grudges and grievances underlie these complaints; the Feds are on the case; unidentified people “close to the investigation” are briefing the media and naming names; and careers, livelihoods and reputations hang in the balance.

Perhaps it’s all a big misunderstanding. But my gut tells me where there’s smoke, there’s fire.

Do you think Morgan and other big banks help hedge funds front run trades? Leave a comment at the bottom and let me know.

More on markets:

AMC Fails to Deliver Pass 2.6 Million in New Report

New Law Could Put Big Short Sellers on the Endangered Species List

Bill Ackman Loses $4.8 Billion

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Photo: “Morgan Stanley Headquarters” by Alex E. Proimos is licensed under CC BY-NC 2.0.

Bill Ackman Loses $4.8 Billion

Hedge fund manager Bill Ackman has taken major losses this year. From a new report by Institutional Investor:

Bill Ackman’s Pershing Square Holdings fell 9.5 percent in June and is now down 26 percent for the year, as investors’ fears of recession outweighed concerns about the inflation Ackman has been inveighing against since last fall. 

Pershing Square’s three biggest stock holdings are down more than the market. Through June, Universal Music Group is down almost 23 percent, Lowe’s Companies fell more than 32 percent, and Chipotle Mexican Grill is down 25 percent.


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He is now significantly underperforming both the S&P 500 and the HFRX Global Hedge Fund Index.

Ackman’s fund had $18.48 billion under management at the beginning of the year. This 26% drop means a loss of approximately $4.8 billion.

In addition to his stocks falling, Ackman also made a large bet that short term interest rates would increase. When they fell on recession fears, he took substantial losses.

Ackman is still betting on higher short term rates. This could expose him to further huge losses.

Ackman is predicting 4-5% interest rates, but markets disagree.

Markets expect short term interest to go no higher than 2.5% next year. Ackman is forecasting 4-5%.

Longer-term inflation expectations are also modest. This could mean less need for rate increases.

The 5 Year Breakeven Inflation rate measures inflation expectations over the next five years. Today, it sits at just 2.51%.

Perhaps Ackman will be proven right in time. But as he nurses this big loss, he’d do well to remember these (perhaps apocryphal) words:

“The market can remain irrational longer than you can remain solvent.”

John Maynard Keynes

What do you think of Ackman’s big stumble? Leave a comment at the bottom and let me know.

More on markets:

New Law Could Put Big Short Sellers on the Endangered Species List

AMC Fails to Deliver Pass 2.6 Million in New Report

Why the Stock Market’s Inflation Worries Don’t Make Sense

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Photo: Bill Ackman