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AMC stock price soars and reaping speculation is behind the gap between the rich and the poor

2021-06-04T11:12:11.182Z


Recently, the popular concept stocks of "wallstreetbets" have been fired again, causing the American movie theater chain AMC's share price to rise sharply, from last Monday (May 24) to $62.55 per share at the close of the market on Wednesday.


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Written by: Commentary Editing Room

2021-06-04 19:00

Last update date: 2021-06-04 19:00

Recently, the popular concept stocks of "wallstreetbets" have been fired up again, causing the American movie theater chain AMC's share price to rise sharply, from last Monday (May 24) per share to $62.55 at the close of the market on Wednesday, which has been recorded within two weeks. A four-fold increase, but AMC announced on Thursday (June 3) that it plans to place up to 11.5 million more shares to reduce debt and for future acquisitions. This news dragged down the stock price early on Thursday by nearly 40%, and finally fell to 51.34. The dollar closed.

The AMC stock chain, which was forced to close due to the epidemic, has become a enthusiastic target of netizens.

(Getty)

Retail investors are reduced to stock market sandwiches

Long before AMC was fired, "WSB stocks" such as GameStop, Blackberry, and Sundial were touted on the online forum Reddit. Retail investors started buying popular short-selling stocks in an effort to attack the bleak prospects of the epidemic and a large number of institutions. Short-selling corporate shares.

These speculations undoubtedly did not consider the fundamentals of the company. They simply wanted to force short sellers to buy up their positions by pushing up the stock price.

According to estimates by the research firm S3 Partners, at the same time that AMC has soared, short-selling investors have lost a total of US$1.23 billion (equivalent to HK$9.49 billion) within a week, and these huge sums of money are an important driving force for AMC's stock price.

However, in the case of AMC, we have to see that retail investors are actually being flanked by both sides in the market.

When the prospects of holding companies are dim, they may first be attacked by short-sellers, causing their assets to shrink faster; but when retail investors successfully counterattack the short-sellers, corporate shareholders can borrow high stock prices to allocate shares again, thereby using retail funds to help themselves.

In addition to AMC, the earlier GME fundraising by allotment after the top-down was also the case.

For the companies involved, this will certainly be an opportunity for a rebirth, but for retail investors, they may lose their money.

Retail investors started to buy popular short-selling stocks in an effort to target corporate stocks whose prospects are bleak and short-selling by a large number of institutions under the epidemic.

(Profile picture / China News Service)

Speculation is due to slow investment?

In this speculative boom, some investors can be said to have regarded stock speculation as a "recruitment coupon" to get rid of poverty.

For example, the "YOLO" statement prevails on Reddit, who believe that they can only live once in a lifetime. They are hoping to get rich overnight after investing in these highly volatile "WSB" concept stocks without having to go to work every day.

This idea more or less stems from the gradual expansion of the capital gap between retail investors and large investors.

After all, if ordinary retail investors only use conventional investment methods, even if their assets can be aggressively estimated to increase by 10% to 15% per year, they will still not be able to catch up with the lives of large households, and it is even harder to say that they have won financial freedom.

After experiencing the new crown pneumonia epidemic, the gap between the rich and the poor in various regions has further widened.

The Federal Reserve's statistics on the wealth level of the United States in the first half of 2020 show that the gap between the rich and the poor among different races, ages and classes has widened, and most of the social capital is in the hands of the rich-the top 1% of the rich have a total net worth of 34.2 trillion yuan US dollars, while the poorest 50% (about 165 million people) still have a total of only 2.08 trillion US dollars.

The same situation is also happening in Hong Kong. As of 2016, the latest figure of the local Gini coefficient has reached 0.539, which means that most of the social income is concentrated in the hands of a few people.

Retail investors who do not belong to this small group of people can easily start to take risks, hoping to make huge profits by letting go.

The proliferation of speculation in society not only stems from the operation of the stock market, but behind it is also the problem of the widening gap between the rich and the poor and the imbalance in the distribution of production income.

In the face of this situation, the government does not have to allocate the fruits of social joint production in proportion to the hands of everyone who has contributed in the allocation of resources.

When a hard-working community at the grassroots level cannot keep up with the wealth growth of large households through stable investment, or even gambling out of poverty in the stock market with an "all or nothing" speculative attitude, it can be described as a social morbidity and it is worthy of reflection by local governments.

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Source: hk1

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