AMC Entertainment Holdings Inc. is really leaning into this whole meme-stock phenomenon.
On Wednesday, the movie-theater chain announced that it would reward small-time investors, who have been instrumental in AMC’s wild, logic-defying 1,400% share rally this year, with goodies such as 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, and shore up its finances.
While Mudrick quickly dumped its entire stake for a tidy profit and called the company massively overvalued, the Reddit retail-trading crowd was having none of it. Buoyed by AMC’s public embrace, the shares soared as much as 93% to an intraday record on Wednesday before trading in the stock was briefly halted in New York. The gains pushed AMC’s market value to roughly $28 billion, surpassing GameStop.
“Many of our investors have demonstrated support and confidence in AMC…After all, these people are the owners of AMC, and I work for them,” Adam Aron, AMC’s chief executive officer, said in a statement Wednesday.
More than 3.2 million individuals owned a stake in AMC as of March 11, accounting for over 80% of its investor base, according to the statement. Early last month, Aron spoke directly to many of these new investors during AMC’s quarterly conference call, cheering their passion, commitment and enthusiasm.
He then urged the skeptical stock analysts to pay attention to these investors — “read what these people write,” he told them.
Few, if any, other top executives in America, have welcomed the newfound influence of the retail set like Aron has. Then again, few companies owe as much to them either.
A few short months ago, AMC was on the verge of bankruptcy. That’s before an army of day traders, hellbent on upending old-school conventions about what companies are worth, rallied around its shares. Using online platforms like WallStreetBets, these small-time traders banded together, adopting hashtags like #AMCSTRONG and #AMCSqueeze on Twitter.
Alongside GameStop, AMC has become a poster child of the meme-stock mania that has captivated markets and confounded the Wall Street pros.
Current trading pegs the company’s market capitalization at over $18 billion, even while the chain carries more than $5 billion of debt and shareholder equity that’s negative by more than $5 a share.
“It is clear that fundamentals don’t support common stock levels at all (which makes sense for the Reddit crowd),” Mark Levin of Asterisk Advisors said in a note.
Buy and Sell
Some savvy investors like Mudrick saw the huge share rally as a unique opportunity to turn a quick profit.
Raising cash through an equity sale to a single holder is relatively rare in U.S. markets. Having the holder flip the stock right after buying it is almost unheard of. In this case, Mudrick’s role in the AMC offering bears a passing resemblance to underwriters in a public offering who purchase shares with the specific intent of reselling them to investors.
A representative for Mudrick declined to comment, and AMC, based in Leawood, Kansas, didn’t respond to requests for comment.
In a statement disclosing the offering, Aron said the deal with Mudrick “will allow us to be aggressive in going after the most valuable theater assets, as well as to make other strategic investments in our business and to pursue deleveraging opportunities.”