To Do or Not to Do: AMC Entertainment Earnings Q&A Is in Focus Today as Retail Investors Push for a Revival of Dividends To Flush Out Those Holding Naked or Synthetic Short Positions
AMC Entertainment (NYSE:AMC), the erstwhile distressed movie theater chain that has seen a dramatic reversal in fortunes, is under the laser-like focus of its devoted army of retail investors today as the company gears up to hold its Q2 2021 Earnings Q&A in a matter of hours.
AMC Entertainment has created a dedicated portal for retail investors to ask any pertinent questions. Interestingly, the top query by far is one relating to the potential revival of the company’s dividend program that was suspended back in 2020. The query, posted by an investor named Thomas B, has garnered immense interest among retail investors due to the wide-ranging implications of the dividend program on the supposed manipulation going on in AMC shares.
Let’s delve deeper. Readers should note that when a company issues dividends, those investors holding a short position are forced to match the payout based on the overall quantum of their position. For instance, if a company issues a dividend of $0.2 per share and an investor holds a short position of 1,000 shares, that investor would be forced to issue a payout of $200 ($0.2 per share x 1,000 shares). This payout goes to the lender of the shares from whom the short-seller borrowed those shares.
Given the entrenched conviction among AMC Entertainment shareholders that the stock is being manipulated by heavyweight investors holding a naked or synthetic short position, the implications of the dividend program are obvious. The action would inflict a supposedly crushing blow to the short-sellers and might even spur a short covering, thereby resulting in a cascade of buy orders that would pump the stock to new zeniths on the back of a short squeeze.
It should be noted that this scenario is premised on the existence of naked or synthetic short positions in AMC Entertainment shares in sufficient quantities. However, Adam Aron, the CEO of AMC Entertainment, had gone on record to state that he was unaware of such an eventuality:
“As to the existence of so-called fake or synthetic shares, or the naked short selling of AMC shares, we are unaware of any information validating these theories.”
Mr. Aron then went on to note:
“Also, we are unable to make any comment on the considerable trading of puts/calls derivatives.”
This uncertainty would be cleared if AMC Entertainment were to revive its dividend program, hence the insistence of retail investors to do so.
As far as the overall share ownership structure of AMC Entertainment is concerned, retail traders own 391.978 million shares, based on 513.33 million outstanding shares and retail ownership of 76.36 percent of the float. On the other hand, institutional investors own 23.31 percent of the float, corresponding to 119.657 million shares, based on a tabulation by Bloomberg on the 28th of July. Finally, AMC insiders own just 0.33 percent of the float.
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