AMC Stock’s borrow fee has been skyrocketing over the past week or so. The higher the borrow fee goes up the more it cost hedge funds to short shares of the stock. Shown in the chart below, some of the recent borrow fees are about as high as we have seen in regard to AMC Stock.
According to Investopedia.com “A stock loan fee, or borrow fee, is a fee charged by a brokerage firm to a client for borrowing shares. A stock loan fee is charged pursuant to a Securities Lending Agreement (SLA) that must be completed before the stock is borrowed by a client (whether a hedge fund or retail investor).“
Below is a breakdown of the last trading day’s entire AMC Stock shares available to short and the cost to borrow the shares. Throughout most of that trading day, the data shows that there are consistently around 500,000 shares available to borrow and the Fee being over 40%.
According to Seeking Alpha when you ask: “How much does it cost to borrow stocks to short?” It says: “The cost of borrowing a stock to short can vary but typically ranges from 0.3% to 3% per year. The fees are applied daily. The borrowing fee can be much higher than 3%, and can even exceed 100% in extraordinary cases, as it is influenced by multiple factors.”
WHAT DOES THIS MEAN FOR AMC STOCK?
Since the cost to borrow shares is so much higher than the historical average, this could mean that short sellers might not be as interested in shorting as in the past. This also means that in theory some short sellers would be interested in closing their positions because they are now very expensive shares to borrow.