Hedge fund Odey lines up bets against ‘meme stock’ favourite AMC

AMC Leisure updates

Odey Asset Administration, the London hedge fund agency arrange by dealer Crispin Odey, has placed on a guess towards the shares of pandemic-hit cinema chain AMC Leisure, one of the vital in style “meme shares” this 12 months.

The agency, which manages about $4.1bn, lately took the quick place — a guess on a falling worth — in portfolios run by James Hanbury, in accordance with investor letters seen by the Monetary Occasions. Hanbury manages about $1.5bn in belongings throughout his funds, together with the LF Brook Absolute Return fund.

The affect of retail buyers is certainly one of a number of components which have “created some main distortions” and a few “compelling quick alternatives” in markets, Hanbury informed buyers in a letter. Odey Asset Administration declined to remark.

AMC has change into one of the vital talked-about meme stock investments this 12 months, alongside consoles retailer GameStop.

Throughout two waves of heavy shopping for, retail buyers, specializing in shares with sturdy momentum and infrequently co-ordinating their actions on on-line boards equivalent to Reddit, pushed up the worth of AMC from $2 on the finish of final 12 months to about $20 in late January.

The shares subsequently fell again, however in late Might they started to surge once more, this time briefly peaking above $65 in early June.

Meme shares have proved a significant problem for hedge funds which have been betting towards them this 12 months. Whereas short-selling can ship massive positive aspects when shares fall, losses are theoretically limitless and crowded positions will be troublesome to exit.

Some retail buyers gave the impression to be instantly concentrating on hedge funds with massive quick positions in shares equivalent to GameStop, and in January helped ship a 53 per cent loss for Melvin Capital. White Sq. Capital, one other fund that guess towards GameStop, lately shut its main fund, the FT reported.

Nevertheless, some funds, equivalent to New York-based Senvest, which constructed a stake in GameStop final 12 months, have been in a position to chalk up huge gains when these share costs soared. Anecdotal proof additionally suggests some funds quietly made cash betting towards meme shares as they fell again on the finish of January.

Hanbury’s place has already been certainly one of his largest winners, in accordance with an investor letter, being profitable in July as AMC’s shares have dropped from almost $57 to $37 by the tip of the month.

AMC entered the pandemic with greater than $4.5bn in debt and greater than $450m in deferred lease funds, however its hovering share worth has helped it elevate money and survive the pandemic. Final month it scrapped plans for an additional fairness fundraising after suggestions from buyers.

Hanbury, whose funds use the Brook Asset Administration buying and selling identify, has gained 3.7 per cent in his LF Brook Absolute Return fund this 12 months, in accordance with numbers despatched to buyers.

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