American Airlines stock went on a speculative tear as investors guessed that the Reddit ‘Wall Street Bets’ forum might turn their attention to the heavily-shorted airline stock after the GameStop play ends, or even sooner.
But the GameStop play is unique, a short squeeze like nothing we’ve seen since Volkswagen in 2008. It isn’t something that happens every day, at the drop of a hat, because a collective hedge fund on Reddit decides a stock is the next meme.
I don’t have a beef with hedge funds, until they start calling for government regulation to protect themselves from retail investors (usually claiming to be concerned that those retail investors might suffer losses, justifying stopping people from buying shares thereby limiting increases in share prices).
And I don’t have a beef with commentators, either, except handwringing over this by CNBC’s Andrew Ross Sorkin who is literally co-creator of Showtime’s Billions where people do this sort of thing every episode. Season 1, Episode 4 was even titled “Short Squeeze.”
Into the GameStop frenzy, comes an American Airlines plan to sell $1 billion in stock. During this week’s earnings call the airline wouldn’t speak to recent share price moves, or comment on GameStop, but mentioned only that they had an outstanding authorization from their board to sell additional shares.
American Airlines authorized the sale of another $1 billion in stock, the carrier said in a filing Friday, an effort to shore up cash as Covid-19 continues to depress travel demand.
American authorized a $1 billion stock sale in October and sold $882.4 million at $12.87 a share. Under the new agreement, it would sell up to $1.12 billion.
The problem for American Airlines, though, is in the time it takes to do the paperwork to pump a billion dollars worth of shares into the market, the Wall Street Bets rumors can shift.
To be sure, the authorization to sell shares isn’t new. But it’s timed coincidentally with the speculative runup in price. Of course investors may just think American Airlines has a good shot at another $3 billion stimmie from Treasury.