AMC files to sell 11 million shares

Cinema conglomerate AMC seeks to further capitalise on “meme stock” frenzy

On Thursday, AMC Entertainment announced its intention to sell more than 11 million shares as it looks to capitalise on the ongoing retail frenzy that has sent its share price surging in recent days.

AMC’s honest recognition of stock volatility

In an SEC filing, the cinema conglomerate stated: “We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last.

"Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.”

AMC stock almost doubled in value during Wednesday trading, having become a firm favourite of the subreddit r/WallStreetBets. The online investing community has seemingly succeeded in replicating January’s GameStop phenomenon, whereby retail traders squeezed the substantial short positions taken by some hedge funds on the Covid-ravaged retailer.

Wednesday’s surge was all the more astonishing as it came a day after the hedge fund Mudrick Capital Management sold its $230m stake in the company only days after acquiring it, describing AMC as overvalued.

The once heavily-shorted company has now risen by more than 3,000% since the start of the year.

AMC deliberately courts retail traders

Whereas GameStop, for the most part, sought to maintain a distance from the “meme stock” crowd, AMC has actively courted them.

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This week, the company announced the creation of a new communication initiative to connect with its “extraordinary base of enthusiastic and passionate individual shareholders.”

Shareholders stand to receive rewards ranging from discount tickets, free popcorn and even private messages from CEO Adam Aron.

According to securities filings, Aron’s personal wealth has ballooned by over $200m in 2021 thanks to the retail craze. AMC had come in for criticism in 2020 for doubling Aron’s pay to $21m, despite the company losing $4.6bn and seeing its revenue plunge by 90% amid the Covid-19 crisis.

AMC stated that it plans to use the money from its latest stock sale for “general corporate purposes”, which could range from purchasing new theatres from smaller distressed cinema chains to paying down its debt pile of over $5.4bn.

AMC traded down by 7.7% towards the opening bell at $57.99, having reached an all-time high of $72.62 in the previous day’s session.

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