What happened
Shares of AMC Entertainment (AMC 3.67%) soared on Thursday, as traders on Reddit, Twitter (TWTR +0.00%), and other social media sites encouraged people to buy the popular meme stock.
By the close of trading, AMC's share price was up more than 35% after rising as much as 52% earlier in the day.
So what
AMC is one of the most talked-about stocks on the 10 million member-strong Reddit group, WallStreetBets. In recent days, Reddit's traders have ramped up their promotion of AMC's stock. Hashtags including #AMCSTRONG, #AMCSqueeze, and even #AMC500k are trending on Twitter. This social media buzz has helped to fuel a sharp rally in AMC's stock price.
Shares of AMC Entertainment have surged this week. Image source: Getty Images.
As the price rose sharply, more people piled in. Individual investors sank over $22 million into AMC's stock on Tuesday alone, according to The Wall Street Journal. And on Thursday, AMC was the most actively traded stock on the New York Stock Exchange.
Now what
Many AMC bulls are hoping to ignite a short squeeze. By coordinating their purchases and driving up the stock's price, they're hoping to force short-sellers to exit their positions. To do so, short-sellers must buy back the shares they sold short -- a dynamic that can accelerate a violent upward move in the price of a heavily shorted stock.
Short-sellers betting against AMC have already suffered hundreds of millions of dollars of losses this week, according to Bloomberg. And with roughly 20% of AMC's float still sold short, it's possible that figure will grow much larger if the short squeeze continues any longer.
However, here are some things investors may want to consider. The #AMC500k hashtag on Twitter is being used to promote the idea that AMC's stock price could soar all the way to $500,000 per share, up from $26.52 today. If that were to occur, with its over 490 million shares outstanding, AMC's market capitalization would be about $245 trillion.
That might be a wee bit high for a struggling movie theater chain, particularly since the total market cap of all U.S. public companies is roughly $50 trillion.
