AMC leads ‘meme stocks’ up after $ 230 million capital increase
Shares of AMC Entertainment Holdings Inc (AMC.N) jumped more than 19% on Tuesday after the movie theater chain said it agreed to sell $ 230.5 million in equity to a company in investment, resulting in gains among a group of “memes stocks” that have benefited from another recent surge in purchases by small investors.
AMC has announced that it will issue 8.5 million shares to Mudrick Capital Management LP, the chain’s latest share sale this year as it cash in on a 1,150% jump in its shares in 2021.
Mudrick sold his stake in AMC at a profit, believing the company’s shares to be overvalued, a person familiar with the matter said on Tuesday. Further details of the surrender could not be determined immediately.
AMC did not immediately respond to a request for comment on the Mudrick divestiture, which was previously reported by Bloomberg News.
AMC has said it will use the proceeds from the recent share sale to invest in its existing theaters, which are expected to benefit from a pickup 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,” CEO Adam Aron wrote on Twitter. thread. “It’s not a crazy dilution, but rather a very smart fundraiser so that we can grow this business.”
AMC shares were trading above $ 31 by mid-afternoon.
The world’s largest movie chain operator has so far raised around $ 1.35 billion through the sale of shares since December 2020.
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.
AMC stock is up 1370% so far this year in a rally that has seen investor sentiment in recent weeks turn back to meme stocks, including video game retailer GameStop (GME.N) . Shares of GameStop, which rose more than 1,600% in January, recently rose about 4%.
The moves were in part fueled by bearish investors unwinding their bets against equities, as well as an abandonment of bitcoin and other cryptocurrencies, whose prices faltered as they were the subject of increased scrutiny from regulators in recent weeks.
The Memorial Day holiday is also expected to have boosted ticket sales, as widespread immunizations attract more Americans to theaters.
“The stock is evaluating a lot of good news,” Thomas Hayes, managing member of Great Hill Capital Llc, said of AMC. He also noted, however, that AMC’s shares are more expensive than they were before COVID-19 hit movie theaters in early 2020.
“Unless you bet twice as many people will go to theaters next year than to theaters in 2019, the stock could be a bit pricey here,” Hayes said.
Meanwhile, US-listed shares of security software provider BlackBerry, another so-called memes stock often discussed on forums like Reddit’s WallStreetBets, rose about 12%.
AMC and GameStop were the most bought stocks on the Robinhood brokerage app focused on retail traders, as well as that of UK-based Freetrade, according to recent data.
On the trading-focused social media site Stocktwits, nearly 96% of AMC-related posts had positive sentiment towards the stock on Tuesday.
“To most seasoned investors it looks like (the Reddit rally) would end badly, but I talk to a lot of younger investors and they still believe this is a way to beat the market,” said Rick Meckler, Partner at Cherry. Lane Investments.
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