Stock Market $AMC Lets the Short Squeeze Continue!!

[Dan Johnston]

I have 10 rentals in Norfolk, VA and only invest in real estate until now. This Stock Market Short Squeeze had tempted me and I got in. Good Luck to any others out there! Stock Market $AMC

[Alexander Szikla]

Please be careful. This is not Wall Street Bets. 

Just to give you qualifications, my background is in finance, so my "tread with caution" deserves warning. 

This is a classic bubble. The dynamics of a short squeeze are real, but eventually rationality prevails. We do not know when that will be however. 

At the current $8 per share - the equity market cap of AMC is ~$750 million. Their debt however, is over $11 B.

Not only is that highly overlevered, but at least if they could tread water that would be alright. Well guess what, the cinema business is highly capital intensive. And if you net their cash flows from operations against their CapEx it is almost a wash.

Basically, they cannot service their massive debt load. So the company needs to either issue more debt (vicious cycle) or equity (share dilution) to catch up. 

Just don't get caught holding the bag when it sinks.