By Akanksha Rana and Sinéad Carew

(Reuters) -AMC Entertainment shares closed down 4% on Friday after short-seller Iceberg Research tweeted that it had made a bearish bet against the theater chain operator’s stock.

The so-called meme stock closed at $51.96 after falling almost 12% to $47.77 in morning trading after Iceberg’s tweet that it had sold the shares short, which involves borrowing shares with a view to buying them back at a lower price to cover the bet.

“Our position is based on the fundamentals of the company and the fact its stock price has been inflated by call options, which is always temporary,” said Iceberg’s Arnaud Vagner in an email to Reuters.

Bearish investors forced to unwind their bets in the face of a rapidly rising stock price have helped fuel rallies this year in AMC, video game retailer GameStop and other companies that are popular on online forums such as Reddit’s WallStreetBets.

AMC shares, while well below their June 2 peak of $72.62, were still up more than 2,500% year-to-date after finishing 2020 at $2.12.

Vagner said that while there are risks associated with betting against meme stocks, “any sharp rise is followed by a correction. This is inevitable.”

Little is known about Iceberg, which publishes a blog with its research on WordPress. Vagner said Iceberg is a company that makes both long and short bets but declined to give further details.

Iceberg gained attention in 2015 for highlighting what it called aggressive accounting practices at Hong Kong-based Noble Group https://www.reuters.com/article/us-noble-group-debt-focus/back-from-the-brink-how-noble-group-was-saved-from-an-iceberg-collision-idUSKCN1LK0GI. Commodities trader Noble denied the allegations but subsequently saw its profits collapse and was forced to sell most of its assets.

Vagner, who said he worked at Noble Group and in credit analyst roles at banks before launching Iceberg in 2015, declined to reveal details of the firm’s short position.

AMC’s latest rally was helped by heavy trading of equity options, financial derivatives that give buyers the right to buy or sell shares at a fixed price in the future, depending on where the stock price is.

As the share price skyrocketed, market makers who sold AMC options were forced to buy the company’s shares to offset their exposure, driving the stock higher in a phenomenon known as a gamma squeeze.

AMC did not immediately respond to a request for comment.

“These meme stocks are so volatile in their trading it doesn’t take much to get a big move up or down,” said MKM Partners analyst Eric Handler, whose AMC rating is “sell” with a $1 price target.

Handler said that AMC’s trading price multiple of 45 times his 2022 estimate for earnings before interest, tax, depreciation and amortization (EBITDA) compares to a historic peak multiple of 9 times EBITDA estimates for movie theater stocks before the coronavirus pandemic.

“At some point in time, I don’t know when that’ll be, inevitably there has to be some type of mean reversion with AMC. I don’t think it can permanently sustain a 45 times EBITDA multiple,” Handler said.

(Reporting by Akanksha Rana in Bengaluru and Sinéad Carew in New York;Editing by Dan Grebler and Grant McCool)

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