Here’s why AMC’s stock surge is different than GameStop
A sign hangs in front of an AMC theater on January 27, 2021 in Chicago, Illinois. Shares of AMC Entertainment more than quadrupled today as investors continue their buying spree on heavily shorted stocks.
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The wild trading in AMC Entertainment is giving investors flashbacks of the GameStop saga earlier this year that blew up hedge funds and caused turmoil on Wall Street. However, the recent frenzy doesn’t appear to have the same force behind it and likely won’t trigger the same ripple effects.
So far, there has been no signs of a liquidity issue at any hedge fund or brokerage firm amid the massive rally in AMC driven by meme-obsessed retail traders. During the historic GameStop short squeeze, hedge fund Melvin Capital got caught short and suffered billions of dollars in losses, while Robinhood rushed to raise new funds to meet liquidity requirements, which sparked fears of overall financial stability and jolted volatility in the broader market.