The most recent data shows that AMC has reached a shocking number of fails to deliver, hitting 1,327,129 fails to deliver — which is also known as trades that never settle. AMC Apes have closely kept an eye on this number and find it alarming that the number is so high. Why are there so many failed to delivers for AMC? According to public records, as of March 23rd, AMC stock has 1,327,129 fails to deliver — which is significantly higher than most other stocks. Failure to deliver occurs when a buyer or a seller is unable to pay their trading commitments on or before the settlement date. When a continuous pattern of high failure to deliver is present, it can indicate that illegal trading practices are going on such as naked short selling.
AMC retail investors have strongly suspected hedge funds of illegally naked short selling the meme stock for a while now. If hedge funds are in fact illegally naked short selling the stock this can partially explain why the AMC stock price has been driven down. The meme stock investors have been waiting for hedge funds to be held accountable for a long time. Even after many AMC “glitches“, along with probes and investigations by the SEC it still seems hedge funds are being let off the hook time and time again.
WHAT IS NAKED SHORT SELLING?
A regular short sale is when an investor sells borrowed shares and has agreed to buy the share back later (hopefully at a lower price) which ultimately would net the investor a profit. A naked short sale on the other hand is when an investor bets against a stock without actually borrowing the existing shares first.
Naked short selling is illegal because of its ability to artificially push down a stock’s price. Essentially short selling creates an environment where investors are not actually borrowing existing shares, but they’re still selling shorts — and as many as they want.
HOW LONG CAN AMC FAIL TO DELIVER?
Eventually if a stock has persistently failed to deliver over a long period of time, the DTCC (Depository Trust & Clearing Corporation) puts the trade in an “obligations warehouse” — where it essentially just disappears. Unfortunately the DTCC is owned by its users, and its users are primarily hedge funds — which as we know seems like it could be yet another conflict of interest. If the DTCC simply removes these unsettled trades and makes them disappear, what would stop hedge funds from continuing to do it again?
As always, AMC retail investors continue to buy and hold their AMC positions. The best way retail investors can help fight the injustices with the hedge funds is by spreading the word about the hedge funds and the possibility of illegal trading activity and buying and holding the stock. Apes believe it’s always a good time to buy AMC because the movement is only getting larger and stronger.