Retail investors' collective holding frenzy ends with two days of madness, across-the-board sharp decline, AMC seizes the opportunity to issue new shares

On Wednesday, despite the surge in the US stock market driven by the US CPI, with the S&P 500 index, Nasdaq 100, and others hitting new historical highs intraday, the retail investors' collective stocks that had been soaring in the first two trading days of the week all plummeted, extinguishing the short squeeze.

GameStop (GME), which closed up about 60% on Tuesday, opened with a 17.3% drop, hitting a low of about 35.4% in the morning. AMC Entertainment (AMC), which closed up 32% on Tuesday, dropped 31.2% in the morning. SunPower (SPWR), which closed up about 60% on Tuesday, dropped 31.4% intraday. Koss (KOSS), which closed up nearly 41% on Tuesday, dropped 31.5% in the morning. BlackBerry (BB), which closed up nearly 12% on Tuesday, dropped over 9% in the morning. In addition, the Reddit forum (RDDT) where the US stock bar associated with the surge in retail investors' collective stocks is located, dropped over 9% in the morning.

Among the aforementioned concept stocks favored by retail investors, several stocks were temporarily halted multiple times during Wednesday's US stock trading due to significant declines. Despite narrowing significantly by the closing, GameStop still plummeted by 18.9%, AMC Entertainment fell by 20%, Koss dropped by 19.2%, BlackBerry fell by 6.9%, and SunPower closed near its daily low, down by 29%.

After the sharp drop on Wednesday, GameStop, AMC, and others gave back about half of the gains from the past two trading days.

In recent trading days, the trading volume of retail investors' collective stocks has significantly increased, although the volume on Wednesday was noticeably lower than the previous two days, showing a decrease in trading activity.

The sharp drop in retail investors' collective stocks on Wednesday is related to AMC's "cashing out." AMC disclosed in a filing that it will issue 23.3 million shares of stock in exchange for notes due in 2026 with a principal amount of $164 million. As a result, the price increase of AMC Entertainment's junk bonds expanded. The company's 10% junk bond due in June 2026 rose by 1.5 cents to 87 cents, and the 7.5% junk bond due in February 2029 also rose by 3.25 cents to 78.25 cents.

Analysis indicates that unlike AMC, GameStop did not take advantage of the stock price surge to issue new shares. Apparently, prior to this rally, GameStop was not prepared with the so-called "at-the-market filing," otherwise it could have conducted a new share issuance without additional filing procedures.

In fact, even without regulatory issues, if GameStop were to issue new shares, it would be the first issuance since raising over $1 billion in 2021, which could anger loyal fans as they have praised GameStop's clean balance sheet: minimal debt and nearly $1 billion in cash. This was one of the reasons why GameStop was considered cheap just a week ago.

Michael Pachter, an outspoken analyst at Wedbush, stated that if GameStop were to issue shares, it could signal to investors that the company acknowledges it's time to cash in.

In contrast, AMC, which seized the opportunity of the surge, is currently negotiating with its creditors to extend the debt maturity. As of the end of the first quarter, before the debt-to-equity conversion, AMC had $624 million in cash and about $4.5 billion in debt, including $2.8 billion due in 2026 Industry insiders believe that the current bullish reasons for GME investors are all focused on the strong trend trading of meme stocks, which may still provide support for the stock price. However, from a fundamental perspective, the near-optimal scenario has already been largely reflected in the stock price.

It should be noted that GME is expected to announce its quarterly financial report soon, and it may have already decided not to or cannot accelerate the disclosure process required by the U.S. Securities and Exchange Commission (SEC) to sell new shares. GME has traditionally released its performance report before the mid-June investor annual meeting, but has not yet formally announced the date of the financial report release, and the company has not immediately responded to media requests for comments on the release date of the financial report.

GME and its CEO and largest shareholder Ryan Cohen are facing an upcoming difficult transformation, as most gamers are turning to downloading new games rather than shopping in physical stores. One key attractive factor of GME is Cohen's halo, as he is also the founder of the largest pet supplies e-commerce company in the U.S., Chewy. Many believe that Cohen has the ability to transform GME, and the current strategy of GME also includes Cohen using cash to invest in stocks.

The recent surge in retail investor group stocks is due to the return of Keith Gill, the top figure in the retail investor circle who ignited the frenzy of such stocks in 2021 and then disappeared. On May 13th local time, Keith Gill (also known as Roaring Kitty/DeepFuckingValue or DFV) posted a meme image on X, showing a person leaning forward in a serious posture while playing a game. This tweet, which seems to sound the battle horn again, has been viewed over 18 million times on X. Subsequently, he posted some movie clips revolving around the return of a character. Prior to this, his last tweet was in June 2021, featuring a video of a cat sleeping