AMC Soars 95%: Is There a New Way to Evaluate Meme Stocks?

AMC Soars 95%: Is There a New Way to Evaluate Meme Stocks?

AMC Entertainment’s Extraordinary Surge

AMC Entertainment Holdings Inc. (NYSE: AMC) witnessed an extraordinary surge on Wednesday, closing at $62.55—a 95% increase—with after-hours trading indicating another 5%+ gain. This follows a substantial jump last week, where the price rose from $12.38 to $26.12. The first two days of this week alone recorded gains of 17% and 95%, respectively.

GameStop Corp. (NYSE: GME), the original meme stock, also experienced a significant rise, climbing 56.5% to close at $282.24 on Wednesday.

What’s Driving the AMC Price Surge?

AMC’s recent gains are unlikely to stem solely from fundamentals. While the cinema chain is gradually returning to pre-pandemic patronage levels, much of the surge appears to be driven by the ongoing battle between short sellers and meme investors.

Reports detailing massive losses incurred by short sellers have only fueled the fire. On May 26 and 27, short sellers in both GME and AMC lost $618 million and $754 million, respectively. Last week, AMC short sellers faced $1.2 billion in losses, likely encouraging more short squeezers to amplify the stocks even further.

The Role of Short Sellers’ Losses

The increasing frequency of reports on short sellers’ daily losses seems to be intensifying the meme stock rally. While these reports may not have triggered the initial price increases, they appear to be motivating meme investors to escalate their positions, pushing AMC and GME prices past their natural short squeeze levels.

For short squeezers, the risk of higher stock prices is secondary to their desire to inflict additional financial pain on hedge funds. The allure of a “mother of all short squeezes” (MOASS) drives meme investors to accept inflated prices, believing the ultimate payoff will justify the costs.

Is There a New Way to Evaluate Meme Stocks?

The rise of social media-driven sentiment, short squeezes, and hedge fund losses points to a new framework for evaluating meme stocks. Traditional metrics like fundamentals and valuation are being overshadowed by momentum, collective action, and the psychological impact of short seller losses. Meme stocks may now be assessed not just on business fundamentals but also on their potential to trigger mass participation and execute successful short squeezes.

Conclusion

The volatility and price action of meme stocks like AMC and GameStop are increasingly disconnected from traditional financial indicators. Instead, factors such as short squeezes, investor sentiment, and social media influence are playing a more significant role in driving their valuations.