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AMC: Manipulation of the Market

Author: Caleb Ang Wei-En

Research Head: Ashwin


As resources on how to invest become plentiful, there has been a huge increase in the number of retail investors in the stock market. It has been pertinent in young adults who are exposed to the influx of resources on social media, through the explosion of beginner-friendly videos on YouTube. The average return of a retail investor is about 2-3% per year while institutional investors are getting about 10-11% per year. Why the discrepancy?? Many people do not know that the stock market has been, and in fact, is still being manipulated every day.

Large institutions manipulate markets by spreading false information and through the dark pool, which is a privately organised financial forum or exchange for trading stocks, allowing institutional investors to trade without exposure until after the trade has been executed and reported. (Chen. 2020) A prime example of this manipulation is the "meme stock", American Multi-Cinema (AMC).

AMC Entertainment is an American movie theatre chain that has been around since 1920. The rise of Netflix and other movie streaming services, along with the onset of the COVID-19 pandemic and its associated lockdowns, caused a huge dip in the demand for AMC’s theatres.

What is short selling?

AMC is a stock that is highly shorted by large institutional investors, meaning that sizeable bets are placed on the stock will decrease in value.

Figure 1. The Basics of Shorting Stock

(Source: Kennon, 2021)

When an investor wants to short a stock, they borrow the shares from a broker and sell them at the current price. They then buy back the shares once the price has fallen (as they expected), and return the shares to the broker, pocketing the price differential. When they borrow the share, there is also a “short interest”, which is based on the number of shares sold divided by the average daily volume of the share. A normal short interest falls below 10%; anything above is considered a high short interest. The price fluctuations in AMC are not normal. Twofold or threefold increases in the stock price in 1 day is not something you see every day. It reached a peak of $72.62 in June 2021.

Why there was a huge fluctuation in price and how r/wallstreetbets saved AMC

r/wallstreetbets is a meme subreddit where retail investors show off how much profits they have made or unrealised losses they have incurred due to impulse purchases of stocks. The site is notoriously known for going against Wall Street investors in the Gamestop Saga, which caused them to lose roughly $30billion in on-paper wealth.

When AMC announced that they were at the brink of bankruptcy, a group of Redditors decided to start the SaveAMC campaign. Similar to the Gamestop squeeze, these Redditors used their cumulative buying power to buy a huge number of shares. They identified themselves as “apes” and vowed to hold on to their shares no matter the price movement. They pulled AMC out from a US$5.5billion debt.

An increase in the movement and knowledge of AMC, spreading rapidly through social media such as Youtube and Reddit, caused a huge buzz in this particular stock. Many new investors who knew nothing about investing had the fear of missing out and jumped right into the stock.

In a matter of a few months, AMC saw an increase in its number of individual shareholders by 3 million; retail investors now hold 80% of the company’s shares. (Deadline, 2021). This caused the short interest to skyrocket to 20%.

As Covid-19 restrictions eased further into 2021, the CEO of AMC, Adam Aron, acknowledged the role of Reddit in bailing out AMC and vowed to improve the company's fundamentals. Mr. Aron opened up cinemas for the public to watch the Conor Mcgregor vs Dustin Poirier 3 fight, charging $25 for tickets to watch in their theatres, as opposed to $69.99 for pay-per-view on ESPN. This reaped huge profits for AMC as this fight was deemed the hottest fight of 2021, along with the more attractive price as opposed to the pay-per-view. Also, The release of many blockbuster movies, such as The Legend of Shang-Chi and Fast & Furious 9, saw huge profits for the movie theatre industry. These improved fundamentals sparked even more investors, including large firms, to invest in AMC.

How short sellers manipulated the whole situation

Institutional investors make use of the dark pool to make large transactions of AMC’s stock to purchase a large number of shares to cover their shorts without greatly affecting the stock price. The use of the dark pool would not cause a surge in the price of the share because the number of shares that these institutional investors buy is large. On 25 June 2021, the average trading volume of AMC was a whopping 330 million. If these transactions were not done on the dark pool, the stock price of AMC would have surged, leading to the “short squeeze” that many people have been talking about.

A short squeeze happens when numerous institutional investors short a stock but the stock's price shoots up instead. short sellers then scramble to close out their positions as rapidly as possible. To close their position, they have to purchase shares to cover their shorts. If numerous institutional investors want to cover their huge amount of shorts, there would be buying pressure on the stock, leading to a jump in stock price. Moreover, they also knew that mainstream media would catch on to the abuse of the dark pool, and hence, they significantly reduced their dark pool transactions in the next month. In July 2021, the dark pool trading volume decreased to a low of 80 million. Institutional investors made use of the dark pool to delay the effects of their huge buying power on the market.

They also made use of synthetic shares, where large institutional investors could take a position without laying down the capital. . They made use of naked shorting, where they used synthetic shares to short the stock. They do not have to borrow shares from a broker to short the stock, but instead, they sell these synthetic shares (which do not exist) in the market, compounding the selling pressure of the shares and hence driving down the stock price. They also keep 100% of profits instead of paying the interest to the broker. Naked shorting is illegal; however, they were never held responsible for doing so, despite evidence that there were billions of shares unaccounted for it.

Large institutions tried to brainwash retail investors holding AMC by spreading fear, uncertainty, and doubt through news sites when AMC was at its peak of $60. One prominent news site that persistently discouraged the purchase of AMC’s stock was the Motley Fool. They constantly promoted that the short squeeze was not going to happen and clearly stated that the company did not have the necessary fundamentals, despite the movie theatre industry recovering as time passed. The Motley Fool, who posted controversial news about AMC, has a money trail that traces back to Melvin Capital, a hedge fund manager who shorts AMC. Melvin Capital in turn is owned by one of the largest institutional investors, Citadel Advisories. This highly suggests that huge institutional investors are manipulating the market by spreading fake news to incite fear into retail investors.

Institutional investors are trying to get long holders of AMC to sell their share, especially the newer investors so that they can profit from their naked shorts and hence repay for their short positions which are causing them to lose huge amounts of money.

These huge rallies in the stock price of AMC bled many institutional investors dry, losing them $1.2billion in a week in June 2021 (Whitten, 2021). Melvin Capital was also down 46% on its short position that week. Another London-based hedge fund closed down due to its major losses.

So what now?

Will a short squeeze ever happen? Nobody knows. Many factors are pointing towards it: the high short interest and the clear evidence of synthetic shares. The short interest is still above 20%. Many retail investors gained from this rise in share price, but are still not letting go of the stock as they believe in the AMC movement. As short interests are still high and the short calls have yet to be covered, many believe that the short squeeze is imminent.

However, retail investors have left a mark on hedge fund managers and this event is one to be remembered by institutional investors. One can only hope that the stock market would be fairer for retail investors. It has already been a year since this situation built up. The market as a whole needs to be relooked.


Amc entertainment holdings inc (Amc) stock price & news—Google finance. (n.d.). Retrieved 13 February 2022, from

‘Dark Pool Definition’. Investopedia,

Goldsmith, Jill. ‘AMC Entertainment Says Its 4.1 Million Individual Investors Own 80% Of Stock, Average 120 Shares Each’. Deadline, 9 June 2021,

Katia , P. (2021a, July 9). Melvin Struggles to Shake Reddit Attack With 46% Loss So Far. Bloomberg.

Kennon , Joshua. (October 30 2021). The Basics of Shorting Stock.

Retail Investor .Org : Research Papers on Retail Investors’ Returns - Investor Education.

‘The Return Expectations of Institutional Investors’. Stanford Graduate School of Business,

Whitten, S. (2021, May 28). AMC short-sellers dealt massive $1.2 billion blow after weeklong stock rally. CNBC.

Williams, Sean. (12 July 2021) ‘8 Lies That Have Fueled the AMC Entertainment Pump-and-Dump Scheme’. The Motley Fool

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