Threshold list: What it means for companies and investors

Yahoo Finance’s Jared Blikre joins the Live show to explain what a threshold list is and what it means for companies as well as investors.

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INES FERRÉ: Another story we're watching, drama continues to manifest for AMC one week after the theater chain reported its 14th consecutive quarterly loss and fourth straight year in the red. CEO Adam Aron tweeting on Tuesday that AMC has been on the threshold list for more than three weeks, but what exactly is the threshold list, and what does it mean for the company and investors? Our own Jared Blikre is here to break it down for us. Jared.

JARED BLIKRE: Yes, a couple of definitions that Adam Aron is throwing us, or at least some technical terms that he's throwing at us, threshold lists and FTDs. And let's get to the first definition, and that would be threshold list.

Now this is going to be a little technical, and I will back up, and we'll get to the naked short selling in a second here. But this is companies whose transaction have failed to clear for five consecutive trading days at a registered clearing agency. Now when you buy a stock, it has one day to clear. When you short a stock, it has one or more days to clear. It depends on where you are historically. But sometimes there are fails to deliver, and a fail to deliver is when you don't have the ability to prove that you borrowed the stock legally before you actually shorted it.

So this gets to naked short selling, and naked short selling of a company is shorting a company's stock that has not been affirmatively determined to exist. Now, most of the time it's illegal. If a hedge fund releases a short report on a stock, they can short it, but they have to pay a borrowing fee. They have to borrow it from somebody so they don't engage in naked short selling, which increases the amount of shares and the float of the company.

Now market makers like those at the New York Stock Exchange-- Citadel is one. They can engage in naked short selling, and it's perfectly legal. It's part of their market-making duties to provide liquidity for a stock.

But all of this is coming ahead of a very important date for AMC, and that is next Tuesday, March 14, when a special meeting of the shareholders going to determine if they should raise their authorized shares. That would be the ability to sell more shares, incorporate some of those A preferred shares from about 424 million to 450 million. Also going to be putting on the ballot a reverse split, potential one, of 10 to 1. So whatever you own right now-- if you own $5.79 share, if you owned 10 of those, you're going to own one, but it's going to be valued $57.90.

So the math works out that you're not making money, losing money, but it does increase the share price because when companies get into the position that AMC is with these big highs here and now these lows, the danger is if it drops below $5 per share, that has important implications. If it drops below $1 per share, that has important implications. They don't want to become a penny stock.

So on the back of all of this, Tuesday going to be the day to watch for AMC. I put our five-year chart here so we can see the [? GameStop. ?] What I would point out is all these peaks are lower and lower and lower. So we haven't seen the amount of bang for buck that we got in the initial [? GameStop, ?] but we also haven't seen a spike this year. So maybe we'll get something in the $15 to $20 range. Hard to say.

INES FERRÉ: It's what apes are always talking about online.

JULIE HYMAN: Yes.

INES FERRÉ: Thanks so much, Jared Blikre.