The two sons of movie theater chain AMC’s CEO were given shares by their dad that have quadrupled in value from $6.8 million to $31.2 million in just three months.
Bloomberg reports that CEO Adam Aron gave his two sons Jeremy and David a combined 500,000 in shares of stock back in March, with an SEC filing revealing the gift on March 17. Each tranche of shares was worth $3.4 million at the time.
The stock was valued at $8.03 per share on March 4 and was hovering around the $8 mark for much of that time, meaning each son’s shares were worth around $3.4 million when they were first given them.
AMC has since become a cult-like ‘meme-stock,’ with amateur traders flocking to buy its shares and driving up prices by doing so.
But thanks to Wednesday’s record gains, each son may now have shares valued at $15.6 million, or a combined $31.2 million, as shares closed up 95.2 percent from the previous day, with the share price rising from $31.98 per share to $62.55.
That gave AMC a total valuation of close to $30 billion, as the firm starts to get back on its feet after COVID-19 shut down most of its movie theaters for over a year.
It’s not clear, however, if the two sons decided to hold on to the gift or sell it before AMC’s stock went soaring through the roof this week.
AMC is getting ready to sell over 11 million shares a day after stocks in the company hit a record-high on the backs of amateur traders (CEO Adam Aron pictured)
Wednesday’s massive gains for the company could pay dividends for Aron’s sons, as a $7 million share gift to them could now be worth over $31 million (Aron pictured with sons Jeremy, furthest left, and David, furthest right)
AMC is making big moves of their own, too. In an SEC filing, AMC said that they were prepared to sell over 11 million shares of their common stock.
‘In accordance with the terms of the Distribution Agreement, we may, through our sales agents, offer and sell from time to time up to an aggregate of 11,550,000 shares of our Class A common stock,’ the company wrote in the filing.
The company appears to be taking advantage of Wednesday’s wild market moves, when shares closed up 95.2 percent from the previous day.
The company says money from the sale of stocks would go towards ‘general corporate purposes.’
Aron’s sons received their gift in March, when the share price was hovering around $8 before it soared in recent days to over $62, a new record for AMC
CNBC reports that those purposes could include paying down existing debt and acquiring new theater assets.
The company did urge caution about buying the stocks they were selling, fully aware of their ‘meme stock’ status.
‘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,’ the company said in their filing.
‘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,’ they added.
AMC shares were up by 20 percent in pre-market trading on Thursday morning before shares began to fall with news of the company’s stock sale.
As of around 8:40am, shares were listed pre-market at $58.70, down almost $4.00 from Wednesday’s record day.
The company appears to be taking advantage of Wednesday’s wild market moves, when shares closed up 95.2 percent from the previous day, from $31.98 to $62.55
The small downturn could dampen spirits after shares in AMC almost doubled on Wednesday.
Prices rocketed 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 percent 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 per share, 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 percent and 68.6 percent, respectively. GameStop rose 13.3 percent.
It was in contrast to the rest of the listless stock market, with the S&P 500 inching up by just 0.1 percent.
The massive rise in AMC’s shares, which are up about 2,850 percent 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 from $8million at the start of the year to more than $220million now thanks to AMC’s surge.
Securities filings show he has not sold any of his shares this year, but he did gift 500,000 of them to his two sons in March.
AMC’s stocks closed at $64.23 on Wednesday – almost doubling in value since the previous day
AMC CEO Adam Aron has seen his own wealth soar by more than $200million since the start of the year thanks to the share surge. He is pictured at an event in LA in 2016
Users on Reddit’s WallStreet Bets celebrated their windfall after the AMC surge, with some posting images of their investment accounts showing they had made thousands of dollars on Wednesday.
‘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 in anticipation of companies failing.
GameStop shares rose more than 1,600 percent 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.
Users on Reddit’s WallStreet Bets celebrated a windfall after the AMC surge, with some posting images of their investment accounts showing they had made thousands of dollars
One user shared an image showing he had made thousands off meme stocks including AMC
Wednesday´s near doubling of the AMC stock price will likely test investors that have shorted AMC in the hopes of seeing its value crater. 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.’
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.
One person said they had put $750 in AMC, and their share was now worth $38,639.
‘I put 750 dollars in I have never had this much I know my dads looking down smiling thankyou apes,’ he wrote, referencing the nickname those who believe in the stock give themselves.
Bed, Bath & Beyond’s stocks closed 62 per cent higher on Wednesday
Security software provider BlackBerry saw shares rise 31.1 percent
Shares in headphone maker Koss were up 68.6 per cent at the close of trading on Wednesday
GameStop, which saw furious share trading in January, closed up 13.35 per cent on Wednesday
What are meme stocks? How Reddit users set out to punish short selling hedge funds
Meme stocks are companies popular with a new generation of social media-centric amateur traders on Reddit’s WallStreetBets and other online forums.
The users have been using apps such as Robinhood to buy up shares in failing our outdated companies as a way to punish hedge funds that had bet massively against them.
The first major winner was video game retailer Game Stop, which saw shares rise more than 1,600 percent in January.
GameStop was one of the most heavily shorted stocks on the market, with more contracts to sell the stock short than there were shares available.
‘Short selling’ is a tool often used by hedge funds. It allows an investor to profit when the price of a share drops. Short sellers borrow a stock, sell the stock, and then buy the stock back to return it to the lender.
Reddit users saw an opportunity for what is known as a ‘short squeeze’, in which rising share prices force short sellers to buy more of the stock to cover their losses.
Users of the Reddit group WallStreetBets urged members to buy and hold GameStop stock, locking up the supply of shares and forcing desperate hedge funds to bid higher and higher to cover their shorts.
Meme stocks are inherently very risky because the huge inflation pushes the value of the company well over what it is actually worth.
Some small investors lost hundreds of thousands when they poured their savings into GameStop shares, only to see the bubble burst in February.
Other popular meme stocks are AMC, which has seen a massive surge in June, as well as Bed Bath & Beyond, Blackberry and Koss Corp.
Another said: ‘What TF just happened’, with a screenshot of their stocks valued at $66,447.
One woman celebrated the stock price and the free popcorn, tweeting: ‘I woke up to my AMC stock making me $400 and to their CEO telling investors they’re giving us a free large popcorn for our first movie back.’
Another boasted of becoming ‘a thousandaire.’
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 percent – its highest close since January 27.
Headphone maker Koss Corp. surged 69 percent; BlackBerry’s shares rose 32 percent; and GameStop – which was subject to a wild surge in stock buying in January – added 13 percent.
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 percent, surpassing even GameStop’s nearly 1,400 percent 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.
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
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 percent 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.