Shares of money-losing movie theater chain AMC continued their dizzying ascent on Wednesday, doubling in value as retail traders continue to rush into the company thinking they’ve taken Wall Street investors under pressure.
AMC shares briefly exceeded $ 70 per share at one point on Wednesday, more than double the $ 32 level they closed the day before. At the close of markets, AMC shares were worth $ 62.55 each, up about 95% on the day.
This share price is about six times what the company was worth just a month ago. The company has become the latest target in a battle between retail traders and Wall Street investors known as short sellers, who make money when stocks fall.
Retail investors on social media networks like Reddit, Discord, and others have bought into the theater chain in droves in recent weeks, buying as many shares as they can get, though activities under- companies are still negatively affected by COVID-19.
Business is not booming
AMC has 585 theaters in the United States and 97 more in Canada and around the world. The vast majority of the chain’s sites are either closed or at reduced capacity, and last month AMC revealed that it lost US $ 567 million in the first three months of the current fiscal year.
The number of paying customers has decreased by 88% compared to the same period before the pandemic. But that hasn’t stopped retail investors from investing money in the chain, believing better times are ahead. The stock has risen by more than 1,100% this year.
Many Wall Street short sellers have bet that the company’s stock price will drop, but when the momentum changes direction, these short sellers are forced to buy a stock higher, creating even more buying pressure to drive up the price in a phenomenon known as short pressure.
WATCH | This short video explains how short selling works:
One of the most memorable short cuts to ever come to video game retailer GameStop earlier this year, and the same ingredients are now in place for AMC.
Although stocks fell a bit in the afternoon, at $ 70 a share, AMC was valued at over US $ 25 billion, which is more than GameStop was worth at the height of its craze. Over 3 million people currently own AMC shares, and their combined ownership is over 80% of the company, an extremely high ratio for any publicly traded company. In rival movie chain Cinemark, for example, less than 10 percent of the company is owned by retail investors, noted Geetha Ranganathan, analyst at Bloomberg Intelligence.
About 20 percent of AMC’s shares, or roughly 95 million, are being sold short, she calculates. And so far this year, short sellers have lost over $ 2 billion betting against the company, according to short selling research firm S3 Partners.
The rise in the company’s shares “is driven largely by the desire of individual investors to reorganize Wall Street by squeezing short sellers and hedge funds,” she says, as fundamental issues with the core business model of society persist.
“Movie theaters shutdowns, capacity limits and film delays mean revenue may not reach pre-pandemic levels for the foreseeable future,” she said, “and the long-term outlook The box office remains low as studios shrink the cinema window and send movies straight to their streaming platforms. “
Chain to offer free popcorn to stock owners
Either way, AMC’s management is building on its newfound popularity with retail investors, raising $ 230 million in cash this week by selling new shares that have been greedily swallowed up by the market.
And the company launched what looks like a loyalty program for its investors on Wednesday, unveiling plans to give investors perks when they hit their theaters – including a big free popcorn when they attend their. first film in person this summer.
“Even though our shareholders now number in the millions (…) these people are the owners of AMC and I work for them,” CEO Adam Aron said in a press release announcing the initiative.
Some watching the company say that trading in AMC shares may not make sense, but that doesn’t mean it can’t continue to defy expectations.
“AMC is trading as if this summer is going to have news Star Wars, Avengers, and Batman movies, “said Edward Moya, strategist at foreign exchange firm Oanda.” The retail force behind this move is still strong, so anyone can guess how big this bubble can get. “