AMC Entertainment shares meme surge riding stock status – Deadline

Retail investing met the marketing genius on Wednesday as AMC Entertainment dedicated a new area of ​​its website to individual investors, stoking their love, doubling the share price and – the company hopes – inflating it. membership in its AMC Stubs loyalty program.

AMC currently has around 3 million individual investors, or 80% of its shareholder base. He was first blown away by the meme stocks frenzy led by GameStop – retail traders who share funny videos and provocative exhortations on Reddit discussion boards and around social media to buy and hold certain stocks. AMC’s spike helped investor Silver Lake cash in abundantly and allowed the struggling theater chain to raise significant cash from stock sales, including $ 230 million from Mudrick Capital this week.

AMC Entertainment shares surpass $ 60 as retail investors pile up; NYSE halts trading twice

Mudrick sold his shares immediately, calling them overvalued. “I have seen buying and selling the same day in IPOs, but I can’t remember anything like it,” said a fund manager stunned by Mudrick’s rapid turnaround and the buying frenzy around a stock that fundamentals analysts value between $ 1 and $ 16. AMC closed 95% higher on Wednesday at $ 62.55. Its market capitalization of $ 28 billion was higher than that of ViacomCBS.

It’s a victory round for CEO Adam Aron, who has had a tough 2020, fundraising piecemeal with theaters closed and, he counted, five strokes of bankruptcy. Given a strong box office for the Memorial Day holiday last weekend and an overall accelerated reopening, he was confident enough to say earlier this week that he is hoping this latest increase in funds will go to purchase ArcLight and Pacific Theaters movie locations.

AMC currently has around $ 1 billion in cash, Wall Streeters estimated, but could face resistance to using its high-profile stocks instead as currency for a trade. Given the volatility “I would advise a seller not to take stock,” one said (unless he can return it very quickly). “Either way, salespeople try to estimate intrinsic value. Most buyers or boards don’t use the market price of the share but do their own analysis, ”they added.

The retail traders, who at the start of this year wanted #SaveAMC, know the company, love the brand and are driving the stock price movement. This is probably in combination with short positions covering the positions and possible programmatic trading – trading based on algorithms based on the movement of stocks. But no one seems to know exactly. New investors call themselves “monkeys” and call themselves Aron “Silverback”.

Will they lose their shirts? “Would you pay $ 120 for a four dollar burger?” Asked an industry player.

“We know how it ends, we think we know when, we just don’t know the way,” Loop Capital media analyst Alan Gould said today. He predicts the stock will pull back by the time the box office returns to normal over the next year “when shareholders recognize the little cash flow per share left to shareholders after debt charges.” We just don’t know the course of the share price by then. “

The debt is around $ 5.2 billion, including deferred rents, he said.

“I would try to sell any stocks I could to pay off the debt,” said another Wall Streeter.

It’s unclear how many shares AMC may sell before its annual meeting scheduled for July 29. The shareholders will then probably vote on an authorization to increase its number of shares. The company tried to increase the number to 500 million this spring, but retail investors protested and AMC dropped that request. The new shares generate cash but dilute the holdings of existing shareholders. This is how Wanda’s position eroded.

Meanwhile, Aron is offering investors free popcorn if they join AMC Stubs, which they can now do through a dedicated window on the site that says, “Welcome AMC shareholders!”

“If you are currently a shareholder, let us know. We’ll send you great deals – starting with a FREE big initial popcorn, just for signing up – and the latest updates from AMC Investor Connect. The popcorn offer will be easily added to your AMC Stubs account within 7 days, so just scan your virtual card to receive the discount.

“What Adam just did was connect the dots” – between customers and shareholders, said an admiring industrialist.

“How do you manage millions of shareholders? Adam Aron rewrote the playbook, ”an expert told CNBC. “In general, companies have more customers than shareholders. Maybe AMC is the one that’s different.

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