APE stock dropped last week to holders of the AMC theaters stock.
THe initiative started from the CEO of the company to reward the long time holders of the theater stock. However, there was another reason to this dividend / preferred stock: to show the world how many shares of AMC exist in reality.
For those who are not aware, there were times in the market when the short interest was higher than 100%. Short selling interest depicts how much of the total number of stocks are being sold short by investors. Since the number is higher than 100% this effectively means there are more shares trade than actually exist.
This practice, although banned ever since the 2007-08 crisis, continues to happen through various loopholes in the financial system:
The current short interest rate of AMC , coupled with the number of shares reportedly held by retail investors, still equate to more than 100%, according to live Ortex data :
Reason to manipulate
The debacle started in January 2021, when a series of “meme stocks” such as GME , AMC, BB rallied to astronomical highs in a short amount of time:
The whole ordeal started after several investors took it to reddit and coordinated a short squeeze which lead to forcing the short sellers to buy back the stock at a higher price so they can pay back the borrowed equity.
Robinhood receives flood of 1 star ratings
During those days, some brokers, most notably Robinhood , prevented the purchase of this equity in order to “protect it’s investors”. Giving that search interest was all time high during that time, it was obvious they desire was to keep the price down. However, only the SEC can stop a trade like that, and it is usually for fraud investigations which was not the case here.
In a public hearing, the CEO of Robinhood – Vlad Tenev, gave a half hearted apology after hours kicking the can down the road. He mentions he received a margin call from their broker/clearing house – Melvin capital who required them to add more collateral.
Eventually Melvin capital went bankrupt even though the price of GME never rose again to the previous highs:
A new generation of investors
Traditionally, we have the bulls and the bears. However, nowadays given the movement of these meme stocks but also somehow influenced by crypto currency, a new term came out : Ape.
The APES are described as someone who doesn’t really research much about the equity and just “apes in”. Others describe them as someone who is interest in leveling the playing field.
APE units were distributed to the AMC shareholders on 1:1 ratio. AMC preferred equity ( APE) will have the same voting rights as common stock . On Monday 22nd, the stock opened at 6.95$.
Sadly, the trade was halted briefly as the stock reached 9.49% and eventually a little over ten dollars. The trading day closed at 6$.
The CEO Adam Aron announced these shares as a special gift to the AMC holders who he owes for saving the company from bankruptcy in 2021.
Will the APE stock rally to astronomical highs like GME and AMC did in 2021 ? Or will the hedge funds keep wash trading options in their ETFs so they can keep the price down ? Will the SEC act on this ? Only time will tell
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