UPDATED with stock surge. Shares in AMC Entertainment surged 24% to close at $12.77 as another wave of retail investors bought into the top theater circuit,
The hashtag #AMCSqueeze trended on Twitter. Threads on Reddit pulsed with excitement about the exhibitors’ shares. Some hedge funds and other financial institutions have “shorted” AMC stock, meaning they placed bets the stock would fall, citing the coronavirus pandemic and the rise of streaming. Individual investors organized on Reddit forums like WallStreetBets, have tried to squeeze the short-sellers with the rallying cry “to the moon” in reference to where they hoped to drive the stock.
The tug of war between short sellers and those willing to bet on the future of movie theaters has reshaped the financial structure of AMC. Hedge fund Silver Lake, once the top shareholder, sold its entire stake after a previous runup in the share price. Chinese conglomerate Wanda, also formerly a major shareholder, has had its position diluted as more than 3 million individuals have piled into the shares.
Top movie theater circuit AMC Entertainment said it has raised $428 million in new capital from the sale of 43 million shares at an average price of $9.94.
The results of the sale followed a plan laid out in an April 27 SEC filing. The company announced the at-the-market stock sale plan at that time, and said it had ditched plans to boost the number of shares by 500 million.
The capital raise “will immediately buttress and fortify our liquidity profile,” CEO Adam Aron said, and “puts AMC in a stronger position to tackle the challenges and capitalize on the opportunities that lie ahead.”
The reversal prevented a major stock overhang, which investors have greeted with enthusiasm. Shares were up 16% in mid-day trading, at about $12.
AMC has managed to survive after being on the brink of bankruptcy numerous times. Its entire circuit was shuttered for months due to the coronavirus pandemic and has only been back open in top markets like New York and LA for a month or two. The company’s debt levels remain high and there are plenty of skeptics out there, especially after its stock took a wild ride along with shares of GameStop and other meme stocks.
Aron has repeatedly saluted the retail investor optimism about the company, describing it as a validation of the company’s efforts to stay solvent.
When the company announced its quarterly earnings last week, Aron quoted Winston Churchill (a favorite inspiration) in detailing his strategy to Wall Street analysts. He cited Churchill’s WWII line, “This is not the end. It not even the beginning of the end. But it is perhaps the end of the beginning.” Aron added, “Sir Winston won his titanic fight. I believe that AMC will win our war too.”
Despite the doggedly upbeat view from the corner office, the reality facing AMC is stark as it attempts to lead the exhibition sector back to full operations in an increasingly streaming-obsessed world. In the most recent quarter, the company’s revenue plunged to $148 million from $941 million in the year-earlier period. Net losses narrowed to $576 million from $2.2 billion, but that was only because the year-earlier quarter included a one-time write-down $1.85 billion.