Now is the Time to Buy AMC, Plus the SPAC Stock Short Squeeze Potential
AMC released preliminary quarterly results yesterday. The highlights include a slight beat on revenue and $216.5 million in operating cash flow generated for the quarter. The stock initially spiked on this great news but has since pulled back to close at $15.42, actually lower than it was before the news.
The same narrative of the shorts is back. That these results weren't good enough, that the company is still going to go bankrupt. There is a data point we can use to understand that this narrative is clearly wrong. Bond pricing.
If AMC was going to go bankrupt, or otherwise do poorly financially, this would be reflected in the bond prices. Bonds are mainly held by institutional investors who won't be tricked into selling like retail shareholders can be. AMC has several sets of bonds. Some of the senior debt is trading above par at very low yields, other bonds are trading at a discount because they are junior to the senior debt.
A very obvious pattern comes up that becomes a lot more pronounced when you look at a one-month chart:
The 2027 bond, for instance, moved up from $67 to $74 in price. That's a 10% increase for a bond since the financials are out, and bonds are supposed to be less volatile in nature than stocks.
So let's ask this, if these financials were indeed weak or disappointing, why are bond prices going up? The stock is being manipulated so that shorts can try to exit. The initial short strategy was for AMC to go bankrupt. But the cash injection from last year plus the positive cash generation from this quarter show that this is increasingly less likely to happen. The shorts will have to cover.
When AMC shorts try to insult the company or threaten you that the company is going bankrupt, simply respond with "if this was the case, why did the bonds rise so much?" AMC bondholders clearly liked the quarter.
Look at it from another perspective. Bond prices have settled in their range for the last 3-4 months. But the stock has fallen by more than half from $40 since then. Yeah, the CEO sold some shares that caused a panic but that was in the mid-$20's. Now AMC is oversold. The bondholders believe that AMC is recovering well. So why is the stock cratering? Now is the time to buy AMC for that massive rebound.
Something else to consider is the turnaround and short squeeze potential on some recent SPAC stocks that have cratered and are due for a bounce. Namely BKKT, OPAD and HLBZ. Each for their own reason:
BKKT - heavy short interest of 11 million shares representing 25% of the float according to Ortex data.
OPAD - strong financial performance potential. Last quarter the company had over $500 million in revenue and $50 million in gross margin on their iBuying business. The market cap is only $870 million.
HLBZ - up 25% on heavy volume in reaction to heavy buying by the CEO at prices much higher than today of $8.20 and $5.78:
The stock closed much closer to the day high than day low so a continuation into tomorrow looks likely.
It's not just the stock that you should consider on HLBZ, but the warrants. HLBZ, OPAD, BKKT and IRNT were all recent SPAC listings that all have 5-year warrants with a strike price of $11.50 that expire around 4.5 years from now. But we see that HLBZW is much cheaper than the other warrant classes despite the stock having a higher price than OPAD and IRNT. It's almost up at BKKT's price but the warrants are trading at one-fifth of BKKT's warrants. HLBZW is an ideal cheap security to take advantage of the spike potential of HLBZ.
Disclosure: Long AMC, BKKT, OPAD, HLBZ
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