Meme-stock surge lifts AMC, BlackBerry; regulator signals concern (updated)

KOSS

07/06/2021 18:44

(Updates throughout, adds bylines, quotes)
    By Aaron Saldanha, Sinéad Carew and David Randall
    June 7 (Reuters) - Shares of AMC Entertainment  AMC.N  and
other "meme stocks" supported by individual traders jumped on
Monday, extending a rally in social-media favorites into a third
week as message boards hummed with talk about the potential to
squeeze Wall Street short-sellers.
    The sharp gains, however, have caught the attention of
regulators at the Securities and Exchange Commission. On Monday
the agency said it is looking into signs of market manipulation
given the "volatility in certain stocks."  urn:newsml:reuters.com:*:nL3N2NP3JJ
    The volatility has also made it challenging for analysts to
cover, with two analysts in the past week dropping coverage of
GameStop  GME.N , the stock that was catapulted higher in
January by retail investors. 
    Cinema operator AMC Entertainment Holdings  AMC.N , which
almost doubled in value again last week, was last up 21.1% at
$58.00 while BlackBlerry's U.S. listing climbed 15.0% to $15.94
and put it up 56% since the start of June. Canadian cannabis
producer Tilray's U.S. listing  TLRY.O , meanwhile, surged 7.1%.
    "AMC never ceases to amaze me. Just when I think that train
is over, it jumps almost 10 points in the first 30 min of
trading," one poster on Reddit wrote.
    Shares of AMC are up more than 2,500% for the year to date
as it has courted individual investors, while shares of video
game retailer GameStop are up about 1,305% over the same time.
 urn:newsml:reuters.com:*:nL2N2NK18L
    However some bearish investors retreated from bets against
AMC on Friday as the stock fell 6.7% that day with short
interest falling 74.5 million shares, or 14.9% of AMC's float by
the end of trade Friday from 88.2 million on Thursday, according
to S3 Partners.  urn:newsml:reuters.com:*:nL2N2NP1OK
    Institutional investors are largely sitting on the sidelines
as the meme-stock rally driven by individual investors
continues.  urn:newsml:reuters.com:*:nL2N2NN0DH
     These individual investors "don't need a reason. They're
trying to do the same thing they did last week. It's a new week.
They start over, the meme stock buyers, the wallstreetbets
Reddit community," said Michael O'Rourke, chief market
strategist at JonesTrading in Stamford, Connecticut.
    Wall Street analysts have largely refused to increase their
target prices - a sign of what they see as the fair value for a
company's shares - despite the retail-investor driven rally.
    Joseph Feldman, analyst at Telsey Advisory group terminated
coverage of GameStop on Monday. His last rating on the stock was
"underperform" and his last price target was $30, approximately
88% below where the company was trading Monday. 
    "We're focusing on other areas," said Feldman. "It's hard to
justify where the stock is trading relative to the
fundamentals."
    That follows a similar decision last week by Bank of America
to terminate coverage of GameStop "due to a reallocation of
resources."  L2N2NP1O7 
    Data showed AMC has been the top-traded stock among clients
of brokerages Fidelity and Freetrade, used heavily by amateur
and individual investors playing with their own money.
 urn:newsml:reuters.com:*:nL3N2NM28J
    On trading-focused social media site Stocktwits, message
volume related to AMC - a barometer of interest in the stock -
rose 6.2% on Monday.  BlackBerry was at the top of the list of
stocks being mentioned on wallstreetbets, according to the
swaggystocks.com sentiment tracker. 
    An SEC spokesperson said in a statement on Monday that they
continue to "monitor the market in light of the ongoing
volatility in certain stocks to determine if there have been any
disruptions of the market, manipulative trading, or other
misconduct."  urn:newsml:reuters.com:*:nL3N2NP3JJ
    "In addition, we will act to protect retail investors if
violations of federal securities laws are found,” the SEC said.
    Market participants have told Reuters that some Wall Street
institutional investors are ramping up complex options trades
that let them bet the shares will fall while keeping a lid on
potential losses if they instead gain.  urn:newsml:reuters.com:*:nL3N2NM3XE
    Among other meme stocks headphones maker KOSS  KOSS.O  rose
12.3%.

 (Reporting by Aaron Saldanha in Bengaluru; Additional reporting
by Akanksha Rana, Katanga Johnson, Noel Randewich, Lance Tupper;
editing by Patrick Graham, Saumyadeb Chakrabarty and Cynthia
Osterman)
 ((Aaron.Saldanha@thomsonreuters.com; +91 80 6749 1130; Reuters
Messaging: Aaron.Saldanha@thomsonreuters.com@reuters.net))