Shares in AMC almost doubled on Wednesday as amateur traders pushed the ‘meme-stock’ to record highs and forced trading to be suspended four times.
The theater chain operator’s shares closed up 95.2% at $62.55, a fresh record. At the close, AMC’s market value stood at $28.17 billion, more than ViacomCBS and Kellogg, as well as fellow meme-stock GameStop.
Its previous closing record had been $35.86, which was set on March 23, 2015, according to FactSet data.
Among other so-called meme stocks – companies popular with a new generation of social media centric traders on Reddit’s WallStreetBets and other online forums – security software provider BlackBerry and headphone maker Koss Corp rose 31.1% and 68.6%, respectively.
The massive rise in AMC’s shares, which are up about 2,850% from just over $2 at the end of last year, is beginning to resemble the wild ride in shares of GameStop earlier this year.
In an apparent nod to the retail investors that have hyped the stock in forums such as Reddit´s popular WallStreetBets, AMC CEO Adam Aron on Wednesday announced an initiative that offered even the smallest shareholder a free large popcorn if they signed up to a regular newsletter.
The Philadelphia-born 66-year-old has seen his own wealth soar by more than $200million since the start of the year thanks to AMC’s surge.
AMC’s stocks closed at $64.23 on Wednesday – almost doubling in value since the previous day
‘Meme stocks’ have caused major upsets in the markets this year, as amateur investors online using apps such as Robinhood to buy up shares in companies as a way to punish hedge funds that had bet massively against them.
GameStop shares rose more than 1,600% in January, buoyed in part by bearish investors unwinding their bets against the heavily shorted stock in the face of a massive buying surge.
But some small investors lost hundreds of thousands when they poured their savings into GameStop shares, only to see the bubble burst.
Wednesday´s near doubling of the AMC stock price will likely test investors that have shorted AMC. Hedge funds were down $5.2 billion for the year and lost nearly $2.8 billion on Wednesday alone, data from S3 showed.
‘If you began your short at under $10 and you were sure the stock was overvalued at $10 it makes more sense that it´s over valued at $30 or $70,’ said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners. However, ‘at a certain point your losses outweigh your thesis.’
Bed, Bath & Beyond’s stocks closed 62 per cent higher on Wednesday
Security software provider BlackBerry saw shares rise 31.1%
Shares in headphone maker Koss were up 68.6 per cent at the close of trading on Wednesday
AMC was the most heavily traded name in options on Wednesday, with 4.6 million contracts traded. About $39 billion worth of AMC shares was traded on Wednesday, by far the most of any stock on Wall Street, per Refinitiv data.
On Twitter and WallStreetBets, some users exhorted one another to hold on to their shares of AMC while others cheered on the rally.
‘$amc let´s go again to $100 and beyond,’ wrote Twitter user @Rodolf30592158.
Financial giants have also piled in on AMC, with New York hedge fund Mudrick Capital Management, that has $3.8 billion of assets under management, buying 8.5 million AMC stocks on Tuesday.
Mudrick then sold them immediately for a reported $25 million profit.
And AMC was not the only one to benefit from Wednesday’s buying bonanza.
Bed Bath & Beyond shares were particularly active, closing at $44.19, up 62 per cent – its highest close since January 27.
Headphone maker Koss Corp. surged 69 per cent; BlackBerry’s shares rose 32 per cent; and GameStop – which was subject to a wild surge in stock buying in January – added 13 per cent.
GameStop, which saw furious share trading in January, closed up 13.35 per cent on Wednesday
Jason Mudrick, founder and chief investment officer of Mudrick Capital Management, launched his firm in 2009. It currently has $3.8 billion under management, according to its website
AMC, which operates the world’s largest chain of movie theatres, on Tuesday issued 8.5 million shares to hedge fund Mudrick Capital Management. The hedge fund, which specializes in high-risk moves, then immediately sold the stock at a profit
AMC’s executives have embraced their new supporters, with an offer made on Wednesday of free popcorn and the promise of exclusive movie screenings to those that held its stock.
The company said Wednesday it´s launching a program called AMC Investor Connect to stay in direct contact with those 3.2 million investors. Many bought AMC stock early this year, even as professional investors ran away.
AMC called them an ‘extraordinary base of enthusiastic and passionate individual shareholders,’ but they’re more likely to call themselves supporters who are taking the stock price ‘to the moon’ and shaking up Wall Street along the way.
‘After all, these people are the owners of AMC, and I work for them,’ AMC CEO Adam Aron said in a statement.
The recent rally has put AMC’s gains for the year to 2,850 per cent, surpassing even GameStop’s nearly 1,400 per cent advance.
It has also resulted in bumper earnings for Aron who has run the company since 2015.
Aron, co-owner of the Philadelphia 76ers, was president and CEO of Norwegian Cruise Lines from 1993 to 1996, and chairman and CEO of Vail ski resorts from 1996 to 2006.
The Philadelphia-born 66-year-old has seen his own wealth soar by more than $200 million since the start of the year.
Easy money from the Federal Reserve has ‘created an almost video game-like atmosphere in the stock market and investing,’ said Michael O’Rourke, chief market strategist at Jones Trading.
He told Reuters: ‘There’s money flowing everywhere and this is a great illustration of that.’
Sentiment around AMC was also supported by strong weekend box office collections in North America, led by John Krasinski’s post-apocalyptic thriller A Quiet Place Part II, one of the first major theatrical releases since last year.
The Memorial Day holiday is also expected to have boosted ticket sales as widespread vaccinations bring in more Americans to theaters.
Across the country, as vaccination rates increase, more people are going to the movies.
Nationwide 72 per cent of theatres are open, Axios reported.
AMC said it would invest the proceeds in its existing theaters, which are set to benefit from a recovery in demand as more states lift COVID-19 restrictions on social gatherings.
‘This can be a real way for AMC to grow again, creating immediate value for AMC shareholders,’ Aron said.
‘This is not mindless dilution, but rather this is very smart raising of cash so that we can grow this company.’
The share sale shows that AMC is ‘obviously forward-leaning here and trying to be opportunistic,’ said Mike Hickey, an analyst at The Benchmark Company.
‘There’s concern on dilution and there’s concern on leverage but if you can raise money, you’d be a fool not to.’
However, it was too early to celebrate for AMC – despite Tuesday’s rise in share price.
AMC is not expected to generate positive cash flow for at least the rest of the year. It narrowly avoided bankruptcy last year thanks to a $917 million cash injection.
And while the Memorial Day weekend set a pandemic record, it still brought in about half of the $230 million in box-office sales in 2019.