I want to discuss what is happening with APE and why it is showing a constant steady decline over time.
I believe that the price action is following a pattern called an exponential decay curve. This curve is defined by:
I overlayed a hand sketched exponential decay curve over the daily chart and we get something like this
Note: A curve like this would require over 100% of the daily volume to be sold as naked shorts, so there is likely some degree of Citi Bank selling shares for $$, which is helping to dilute the float at an accelerated rate.
Here is another chart showing how naked shorts affect the price.
Where are all these naked shorts coming from?
Stock locates. Every single day, 10,000,000 shares appear available to short, then magically get completely lent out by 9am est. It is important to note that 10,000,000 is the maximum number of shares that can be shown. The true number is likely much higher than 10 million.
And here’s an image from a couple months ago, which shows that it happens every single day.
This is likely done through a loophole called a one-day lend
Here is a video outlining the process told by the CEO of Overstock in greater detail than I ever could:
We can also see that there is almost no correlation with APE and any other tickers. Here is the chart against SPY for today. Even during the massive market pump, APE continued to fall in price.
The reason for this is that APE is not tied into ETF baskets, has no options, and is generally disconnected from all other market moving factors. It is in its own unique basket which is “naked short this ticker as aggressively as possible”. The idea behind this really twofold.
1) AMC is using APE to pay back debt. Short sellers cannot allow that to happen. If APE is too low to pay off their debt, they still can spew their bear case.
2) APE itself is dilutive. As AA (or Citi Bank) sells APE shares for $$$, the price will drop and naked shorting it as much as possible guarantees profits when he does sell more shares, plus it forces him to sell an even greater number of shares to make the same amount of money. This is also known as a death spiral
As for today’s after hours price action, there were 7.5 million shares traded after hours at exactly 1 dollar. In my mind, this could be one of two things.
1) MMs held retail buy orders for 1$ (which were likely in the millions since it is such a key price), or
2) Citi Bank sold 7.5 million APE shares at 1$, diluting the price by 7.5 million shares.
I am eagerly waiting to see if AA addresses this and what his course of action will be.
I made a post a couple months ago theorizing that APE will have a 1 BILLION + trade volume over the course of 1-2 days by Christmas time, and I still believe that to be true. All these naked shorts need to get their FTDs reset, and that typically happens through share buy-ins, where the shorted shares are purchased then very quickly sold back onto the market. This leads to incredible daily volume spikes as well as some very interesting price action. At the very least, it will give us a small window into what the true naked short interest looks like.
Tell me what you think is going on, or if any of my theories don’t hold water.
There isn’t a speculation flair, so I just marked this as discussion.
TL;DR – APE being diluted as quickly as the short sellers can possible dilute it in order to achieve a death spiral effect on the price and AMC’s debt reduction plan.