- Odey Asset Management is plotting a short bet against AMC, according to a Financial Times report.
- An investor letter cited by the FT points to “major distortions” stemming from AMC’s retail-driven run-up.
- As AMC’s price has fallen below $US30 ($AU41), short bets against AMC have begun to grow.
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Another hedge fund is plotting a short bet against AMC as the meme-stock favorite loses momentum, according to a Financial Times report.
In a trade led by partner James Hanbury, Odey Asset Management, a hedge fund managing over $US4 ($AU5) billion, has taken out a short position against AMC, on the theory that retail zeal has driven the movie chain’s stock above sustainable levels.
“Major distortions” stemming from AMC’s retail-driven run-up have presented some “compelling short opportunities,” according to an investor letter written by Hanbury and obtained by the FT.
Hedge fund Melvin Capital became widely reviled by online retail investors in the early days of the GameStop meme-stock trade, as a frenzy of investment popularized via Reddit squeezed Melvin’s short position, generating huge losses. But some less notorious hedge funds, like Union Square Park Capital Management, have been able to profit from quietly betting against retail trends.
For its part, Odey’s European fund gained over 22% in the first several weeks of 2021, as the Reddit mania was at its peak, according to previous FT reporting.
From a high-single-digits base, AMC’s price rocketed up in early June, cresting over $US70 ($AU95) before settling near $US50 ($AU68). But momentum has slowed in recent weeks as the stock has come down below $US30 ($AU41). And as the price has steadily fallen, short bets against AMC have begun to grow.
Short-seller Iceberg Research last month said it would bet against AMC on account of its weak fundamentals and inflated price, noting that AMC’s rapid price surge was fueled by call options and thus cannot be sustained.
AMC was trading at $US31.02 ($AU42) as of 11:43 a.m. ET, up 4% so far on Thursday.