Hedge fund Odey lines up bets against ‘meme stock’ favourite AMC
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Odey Asset Management, the London hedge fund firm set up by trader Crispin Odey, has put on a bet against the shares of pandemic-hit cinema chain AMC Entertainment, one of the most popular “meme stocks” this year.
The firm, which manages about $4.1bn, recently took the short position — a bet on a falling price — in portfolios run by James Hanbury, according to investor letters seen by the Financial Times. Hanbury manages about $1.5bn in assets across his funds, including the LF Brook Absolute Return fund.
The influence of retail investors is one of several factors that have “created some major distortions” and some “compelling short opportunities” in markets, Hanbury told investors in a letter. Odey Asset Management declined to comment.
AMC’s shares rose as much as 9 per cent in early trading and were recently trading up 5 per cent at $31.20. Odey’s short position in the stock has not previously been reported.
AMC has become one of the most talked-about meme stock investments this year, alongside consoles retailer GameStop.
During two waves of heavy buying, retail investors, focusing on stocks with strong momentum and often co-ordinating their actions on online forums such as Reddit, pushed up the price of AMC from $2 at the end of last year to about $20 in late January.
The shares subsequently fell back, but in late May they began to surge again, this time briefly peaking above $65 in early June.
Meme stocks have proved a major challenge for hedge funds that have been betting against them this year. While short selling can deliver big gains when stocks fall, losses are theoretically unlimited and crowded positions can be difficult to exit.
Some retail investors appeared to be directly targeting hedge funds with large short positions in stocks such as GameStop, and in January helped deliver a 53 per cent loss for Melvin Capital. White Square Capital, another fund that bet against GameStop, recently shut its main fund, the FT reported.
However, some funds, such as New York-based Senvest, which built a stake in GameStop last year, were able to chalk up huge gains when these share prices soared. Anecdotal evidence also suggests some funds quietly made money betting against meme stocks as they fell back at the end of January.
Hanbury’s position has been one of his biggest winners, according to an investor letter, making money in July as AMC’s shares dropped from nearly $57 to $37 by the end of the month.
AMC entered the pandemic with more than $4.5bn in debt and more than $450m in deferred lease payments, but its soaring share price has helped it raise cash and survive the pandemic. Last month it scrapped plans for a further equity fundraising after feedback from investors.
Hanbury, whose funds use the Brook Asset Management trading name, has gained 3.7 per cent in his LF Brook Absolute Return fund this year, according to numbers sent to investors.