GameStop Short Sellers Close $744 Million Of Positions, AMC Bears Lose $2.8 Billion In June

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Video game retailer GameStop Corporation (NYSE:GME) and theater chain AMC Entertainment Holdings, Inc (NYSE:AMC) have taken diverging paths when it comes to the war between hedge-funds betting against the stocks and retail investors determined to ensure that the companies' share price does not fall and result in the former making a profit.

Short-sellers who have persisted with betting against GameStop despite the company's share price being propelled by a staggering 1,056% ($182) since January closed roughly one-third of their positions by the end of June, while those who had bet against AMC lost a staggering $2.9 billion during the same period reveals data gathered by research firm S3 Partners, LLC.

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AMC Biggest Loser Stock For Short Sellers In June Reveals Data

At the end of May, short interest in AMC and GameStop stood at $2.36 billion and $2.57 billion, respectively. In trading, short interest refers to the monetary value of the shares of a stock borrowed and sold on the market in hopes that their price drops. Therefore, the value of the short interest of a security is also affected by its underlying price. If the price increases, the short interest also increases, given that the short-sellers have not closed their position. The May short interest was accompanied by 11.55 million GameStop shares and 90.52 million AMC shares being sold short on the market.

By the end of June, short interest in the pair stood at $4.8 billion (AMC) and $1.76 billion (GameStop), and the number of shares sold short stood at 88.3 million and 8.4 million, respectively. For GameStop, this figure further dropped to 8 million by the close of last week for a 30% decrease.

For GameStop, it's evident that the drop in short interest is a result of downward price movement and the short-sellers closing their positions. To 'close' a position is to buy back the shares that have been sold on the market, and for GameStop, a little over 3 million of the shares were repurchased by the end of June. During the same time period, the company's share price also dropped by 18%, indicating that the short-sellers were eager to take their gains rather than wait for further drops.

Additionally, and more importantly, S3's data shows that last month, short interest for GameStop dropped by roughly $900 million, out of which $744 million was due to the short-sellers closing their positions. Therefore, it's clear that the bulk of the short interest drop in June resulted from the institutional investors exiting the market, a conclusion backed by the three million drop in shorted shares.

Short sellers betting against AMC Entertainment faced heavy losses in June, according to data from S3. Image: S3 Partners, LLC

While investors short-selling GameStop left the market, those betting against AMC faced painful losses. According to S3, AMC was the biggest loser for the short-sellers in June, as they ended up losing more than $2.8 billion in the stock. AMC's shares closed at $32.04 on the first day of June and soared to $62.55 by the end of trading the next day, marking gains of 95%.

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However, compared to GameStop, the AMC short-sellers did not close their positions by the end of June, as the total number of shorted shares dropped by a meager two million. While overall short interest in AMC doubled during June, S3's data for positions closed reveals that $554 million of short positions in AMC were also closed during the same time.

The 15% price drop for AMC over the past five days shows why the short-sellers did not exit the market despite the behemoth price increase. After weathering the GameStop storm, which saw the company's price soar to a record high of $347 in June, the short-sellers appear confident that the price increase for AMC is a one-time affair. However, whether it will drop below $32 or go down further is uncertain and will determine whether the institutional investors continue to hold their ground in their battle with the retail camp.