The trading fringe that propelled the shares of AMC Entertainment Corp. Growing by more than 600% so far may have saved the filmmaker from bankruptcy, but the company still faces formidable challenges after being hit by the coronavirus pandemic.
AMC AMC,
is one of many shares that have been briefly swept away by the stock of video game retailer GameStop, which has grown by more than 1,600% over the past two weeks, amid investor support on the RedSit WallStreetBets message board.
The same investors are now urging each other on today’s Reddit to make AMC the next GME GameStop,
to create a short press that “will take her to the moon,” telling others to “buy and hold and not sell.”
Like the other names caught in this speculative frenzy, AMC had a high level of short interest as a percentage of floating, which was about 69%, according to the latest data, although a sale of shares on Monday will reduce this percentage.
Do not miss: It’s not just GameStop: Here are some of the other short-circuited stocks that disappear above
Shares of the world’s largest film chain rose 250 percent on Wednesday, making it the biggest winner of major US stock markets. With an increase in volume of over 1 billion shares, the share was also the most active traded on that day, even though there were no new developments to drive the movement.
AMC has just seen a year in which many of its theaters were closed or operating at limited capacity, and major studios refrained from launching new blockbusters. The outlook for 2021 is not much better, according to Eric Schiffer, executive director and president of patriarchal organizations and reputation management consultants and a restructuring expert.
See also: GameStop, AMC trading is now restricted to TD Ameritrade, Schwab
“Most people would not want to be placed indoors for hours when there are variants (of COVID-19 coronavirus disease) against which vaccines cannot even inoculate,” Schiffer said. “The viability of the business before the stock inflation on the market did not change the calculation. If they survive, it will not be the same business. It will take years for them to recover back to where they were. ”
AMC took advantage of the steep rise in share prices through the opportunistic exploitation of equity and debt markets, raising another $ 917 million this week, which CEO Adam Aron described as the bright sun on AMC.
“I have 917 million reasons to be a smiling man,” Aron told MKM analyst Mike Hickey. “It helps us deeply in 2021. With any kind of partial recovery of the film industry, this will take us to 2021. The imminent bankruptcy is complete. We believe that we have the necessary track to get through this pandemic. ”
Mike O’Rourke, chief market strategist at JonesTrading, noted this week that AMC’s market capitalization of $ 5.6 billion is almost double that before the pandemic. At the same time, the number of its shares rose to 337 million from 58 million in October.
“Management deserves credit because it has taken advantage of the environment to gather resources to prevent bankruptcy,” he wrote.
AMC did not respond to requests for comment by email and phone. The Securities and Exchange Commission declined to comment. GameStop did not respond to a request for comment.
Schiffer said the company has yet to pay its bills and manage its network of 1,000 theaters and 11,000 screens worldwide. The company posted a loss of nearly $ 1 billion in the third quarter as revenues fell to $ 119.5 million from $ 1.317 billion in the previous quarter. The loss per share was about double what was expected of Wall Street, as reopening efforts were at best hectic.
So does this group of Reddit investors support the wrong horse?
“This is certainly not rational, these are crazy Fed-fueled markets,” Schiffer said. “Investors are looking for profitability because rates are so low … you’ll see periods that seem crazy … and AMC is largely overvalued because of internet-fueled robbery of shorts and these aggressive packaged traders. “This is the power of the Internet,” he said.
The frantic transaction in AMC could have had an unintended effect on the shares of a similar company, AMC Networks AMCX,
the cable network behind the hits, including “Mad Men” and “The Walking Dead.” The stock, which trades under the “AMCX” marker, fell 16% on Wednesday, while remaining 129% in the last three months.
AMC Networks also has a high percentage of short-term interest as a percentage of floating, at about 60%, according to FactSet.
AMC Networks has had no new developments lately, other than its intention to issue $ 1 billion bonds to replace more expensive debt with cheaper debt.
Do not miss: Stop laughing at GameStop’s mania for action – no, really