American Airlines stock spikes as social media users pile in.
The company’s stock was up as much as 30 percent at one point before giving up most of those gains and ending the day up more than 9 percent. The airline also reported financial results for 2020 on Thursday, saying it lost nearly $8.9 billion last year.
On the social media site Reddit, traders on the Wall Street Bets page, a community known for irreverent market discussions, have caused shares in other troubled companies, such as GameStop and AMC, to surge in recent days as they sought to take on some of Wall Street’s most sophisticated investors. In one post on Wednesday night, a Reddit user suggested American should be next because many professional investors had bet against its stock.
On a call with analysts and reporters on Thursday, American’s chief executive, Doug Parker, said the airline would not comment on the stock activity.
“Before I begin my prepared remarks, I want to pre-emptively state that we will not be commenting nor answering questions on the recent activity in our stock price,” Mr. Parker said. “As a rule, we don’t speculate on the day-to-day movements in our stock price and we’re going to stick to that rule today.”
The Reddit traders have focused on companies that are the focus of short sales, a maneuver investors use to bet that a company’s share price will fall.
American is the most shorted U.S. airline, with short sales accounting for about 23 percent of its total shares, according to S3 Partners, a data firm that tracks such trading. (JetBlue is second, with just 4.9 percent of shares shorted.) Professional investors consider American to be especially troubled because it entered the coronavirus pandemic with far more debt than Delta Air Lines, United Airlines and Southwest Airlines.
If they are right, short sellers can reap handsome profits. But if the stock prices soar, they can run up huge losses. By driving up the price of stocks that have been heavily shorted, small investors coordinating on Reddit, Discord and other online platforms have squeezed professional investors and forced some to give up their short trades to cut their losses.
By midday, Robinhood, the trading service popular with amateur investors, said it had restricted trading of certain company stocks, including American, GameStop, AMC and Best Buy, angering some of its users. On Twitter, Representative Alexandria Ocasio-Cortez, a New York Democrat, called the move “unacceptable.”
