AMC Entertainment Holdings Inc. is really leaning into this whole meme-stock phenomenon.
On Wednesday, the movie-theater chain announced it would be rewarding small-time investors who played a key role in AMC’s wild, logic-ridden 1,400% share rally this year with gifts like special screenings and free popcorn. It comes a day after AMC took advantage of those meteoric gains to raise $230 million directly from one of its main creditors, Mudrick Capital Management, to shore up its finances.
While Mudrick quickly dumped his entire stake for a clean profit and called the company massively overvalued, the Reddit retail-trading crowd was none of that. Buoyed by AMC’s public embrace, shares rose 93% on Wednesday to an intraday record high, before trading in the stock was briefly halted in New York. This profit pushed AMC’s market value to nearly $28 billion, surpassing GameStop.
“Many of our investors have shown support and trust in AMC. After all, these people own AMC and I work for them,” Adam Aron, AMC’s chief executive, said in a statement Wednesday.
According to the statement, over 3.2 million individuals held stake in AMC as of March 11, which is over 80% of its investor base. Earlier last month, Aaron spoke directly to several of these new investors during AMC’s quarterly conference call, extolling their passion, commitment, and enthusiasm.
He then urged skeptical stock analysts to pay attention to these investors — “read what these people write,” he told them.
Few, if any, other top executives in the US have welcomed the retail set’s newfound influence as Aaron has. Then again, some companies owe them as much.
A few months back AMC was on the verge of bankruptcy. It is in front of an army of day traders, intent on dismantling old-school conventions about what companies are worth, rallied around their stocks. Using online platforms like Wallstreetbets, these small traders banded together on Twitter, adopting hashtags like #AMCSTRONG and #AMCSqueeze.
Along with GameStop, AMC has become a poster child of the meme-stock frenzy that has captivated the markets and confused Wall Street professionals.
Current trading puts the company’s market capitalization at over $18 billion, while the chain has more than $5 billion in debt and shareholder equity that is negative at more than $5 per share.
Mark Levine of Asterisk Advisors said in a note, “It is clear that fundamentals do not support common stock levels (which is understandable to the Reddit crowd).
buy and sell
Some savvy investors like Mudrick saw the stock rally as a unique opportunity to make quick profits.
Raising cash through equity sales to a sole holder is relatively rare in US markets. It is almost unheard of for the holder to flip the stock immediately after buying it. In this case, Mudrick’s role in an AMC offering is similar to that of underwriters in a public offering, who purchase shares with the specific intention of reselling them to investors.
A representative for Mudrick declined to comment, and AMC, based in Leewood, Kansas, did not respond to requests for comment.
In a statement disclosing the offering, Aaron said the deal with Mudrick “will allow us to go aggressive on the most valuable theater assets as well as make other strategic investments in our business and pursue delivering opportunities.”
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