AMC shares DOUBLE in value in one day as ‘meme stock’ rally gains momentum

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Shares in AMC nearly doubled on Wednesday as amateur traders pushed “meme stocks” to record highs, forcing trading to pause four times.

Shares of the theater chain closed 95.2% higher at $62.55, a new record. At the close, AMC’s market value was $28.17 billion, more than ViacomCBS and Kellogg, as well as GameStop, fellow meme stock.

The previous closing record was $35.86, which was set March 23, 2015, according to data from FactSet.

Among other so-called meme stocks — companies popular with a new generation of social media-focused traders on Reddit’s WallStreetBets and other online forums — security software vendor BlackBerry and headphone maker Koss Corp rose 31.1% and 68.6%, respectively.

The massive surge in AMC’s stock, which rose about 2,850% from just over $2 late last year, is beginning to resemble the wild ride in GameStop’s stock earlier this year.

In an obvious nod to the private investors who have hyped the stock in forums like Reddit’s popular WallStreetBets, AMC CEO Adam Aron announced an initiative Wednesday that offered even the smallest shareholder a free large popcorn if they signed up for a regular newsletter.

Shares of AMC closed at $64.23 on Wednesday - nearly doubling in value from the previous day

Shares of AMC closed at $64.23 on Wednesday – nearly doubling in value from the previous day

“Meme stocks” have caused major turmoil in the markets this year as amateur investors use online apps like Robinhood to buy up stock in companies as a way to punish hedge funds that had bet against them en masse.

GameStop shares were up more than 1,600% in January, boosted in part by bearish investors who downsized their bets on the strongly shorted stock in the face of a massive buying wave.

But some small investors lost hundreds of thousands pouring their savings into GameStop stock, only to see the bubble burst.

The nearly doubling of the AMC stock price on Wednesday is likely to test investors who have shorted AMC. Hedge funds fell $5.2 billion for the year, losing nearly $2.8 billion on Wednesday alone, data from S3 shows.

“If you started short at less than $10 and you were sure the stock was overvalued at $10, it makes more sense that it was overvalued at $30 or $70,” said Ihor Dusaniwsky, director of predictive analytics at S3 Partners. . But ‘at some point your losses outweigh your thesis.’

Shares of Bed, Bath & Beyond closed 62 percent higher on Wednesday

Shares of Bed, Bath & Beyond closed 62 percent higher on Wednesday

Security software supplier BlackBerry saw shares rise by 31.1%

Security software supplier BlackBerry saw shares rise by 31.1%

Shares in headphone maker Koss rose 68.6 percent at the end of trading on Wednesday

Shares in headphone maker Koss rose 68.6 percent at the end of trading on Wednesday

AMC was the most traded name in options on Wednesday, with 4.6 million contracts traded. About $39 billion worth of AMC shares traded on Wednesday, the vast majority of all stocks on Wall Street, according to data from Refinitiv.

On Twitter and WallStreetBets, some users urged each other to hold on to their AMC shares, while others cheered the rally.

“$amc let’s go back to $100 and beyond,” wrote Twitter user @Rodolf30592158.

Financial giants have also piled on AMC, with New York hedge fund Mudrick Capital Management, which has $3.8 billion in assets under management, and bought 8.5 million shares of AMC on Tuesday.

Mudrick then immediately sold them for a reported profit of $25 million.

And AMC wasn’t the only one to benefit from Wednesday’s buying bonanza.

Bed Bath & Beyond shares were particularly active, closing at $44.19, up 62 percent — the highest close since Jan. 27.

Headphone maker Koss Corp. increased by 69 percent; BlackBerry’s shares rose 32 percent; and GameStop — which was subject to a wild wave of stock purchases in January — added 13 percent.

GameStop, which saw furious stock trading in January, closed 13.35 percent higher on Wednesday

GameStop, which saw furious stock trading in January, closed 13.35 percent higher on Wednesday

Jason Mudrick, founder and chief investment officer of Mudrick Capital Management, launched his company in 2009. It currently has $3.8 billion under management, according to its website

Jason Mudrick, founder and chief investment officer of Mudrick Capital Management, launched his company in 2009. It currently has $3.8 billion under management, according to its website

AMC, which operates the world's largest chain of movie theaters, issued 8.5 million shares on Tuesday to hedge fund Mudrick Capital Management.  The hedge fund, which specializes in risky moves, then immediately sold the stock for a profit

AMC, which operates the world’s largest chain of movie theaters, issued 8.5 million shares on Tuesday to hedge fund Mudrick Capital Management. The hedge fund, which specializes in risky moves, then immediately sold the stock for a profit

AMC’s executives have embraced their newfound supporters, with an offer made Wednesday of free popcorn and the promise of exclusive movie screenings to those who had the supply.

The company said Wednesday it is 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 walked away.

AMC called them an “extraordinary base of enthusiastic and passionate individual shareholders,” but rather they call themselves supporters who take the stock price “to the moon” and shake Wall Street along the way.

“After all, these people are the owners of AMC and I work for them,” AMC chief executive Adam Aron said in a statement.

The recent rally has brought AMC’s profit for the year to 2,850 percent, even surpassing GameStop’s nearly 1,400 percent lead.

It has also resulted in great earnings for Aron, who has been running 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 net worth rise more than $200 million since the beginning of the year.

The Federal Reserve’s easy money has “created an almost video game-like atmosphere in the stock market and in investing,” said Michael O’Rourke, chief market strategist at Jones Trading.

He told Reuters: ‘Money is flowing everywhere and this is a good illustration of that.’

Sentiment surrounding AMC was also bolstered 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 boost ticket sales as widespread vaccinations bring more Americans to theaters.

As vaccination rates rise, more people are going to the cinema across the country.

Nationally, 72 percent of theaters are open, Axios reports.

AMC said it would invest the proceeds in its existing theaters, which will benefit from a recovery in demand as more states lift COVID-19 restrictions on social gatherings.

“This could be a real way for AMC to grow again and create direct value for AMC’s shareholders,” said Aron.

“This is not mindless dilution, but rather very clever raising so that we can grow this company.”

The stock sale shows that AMC is “clearly forward-thinking and trying to be opportunistic,” said Mike Hickey, an analyst at The Benchmark Company.

“There’s concern about dilution and there’s concern about leverage, but if you can raise money, you’d be crazy not to.”

However, it was still too early for AMC to celebrate, despite Tuesday’s price increase.

AMC is not expected to generate any positive cash flow for at least the remainder of the year. Last year, it narrowly avoided bankruptcy thanks to a $917 million cash injection.

And while Memorial Day weekend set a pandemic record, it still brought in about half of the $230 million in box office sales in 2019.

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