What’s the fuss?
After a disappointing month, AMC Entertainment Holdings’ stock soared higher on Tuesday, destroying short sellers in the process.
The stock of AMC Entertainment (ticker: AMC) jumped 24% to $43.09 on Tuesday, its highest closing since July 9. According to Dow Jones Market Data, AMC stock is still down 24% month to date in July.
AMC stock has dropped by approximately 30% since the company’s June stock offering, but it is still up more than 2,000% this year.
AMC is a big meme stock, which means that its daily price fluctuations are frequently unexpected, due to variables such as social media buzz, options and momentum trading oddities, and short seller activity.
Short-selling
Short-selling data source S3 Partners managing director Ihor Dusaniwsky told Barron’s that 75.8 million AMC shares are sold short, or about 15% of shares available for trade. He believes that shares shorted have fallen by roughly 4 million in the last week, indicating that there has been some covering. However, with the stock up $8.47 on Tuesday, short sellers lost $642 million in mark-to-market losses, bringing their year-to-date losses to $3.82 billion.
Why is AMC stock seeing an upsurge?
AMC did provide some interesting information to investors. The business said after the market closed on Monday that it will be adding two former Pacific Theatres sites in the Los Angeles region.
It is a great pleasure to announce two long-term leases on The Grove and The Americana. Gorgeous theatres as our newest AMC’s! No ordinary theatres, in 2018 the 2nd and 5th highest grossing movie theatres in greater Los Angeles. Hoping to add several more theatres as well. pic.twitter.com/n1kPGHcACx
— Adam Aron (@CEOAdam) July 19, 2021
It also stated that it is in talks with other property owners about adding other closed sites. Consolidation would be beneficial to AMC, but justifying the stock’s present levels would need some big assumptions.
AMC said last week that its cinemas had set a second straight post-reopening weekend attendance record. The majority of the more than 3 million worldwide spectators were in cinemas in the United States.
AMC Entertainment Holdings (NYSE:AMC), a meme stock favourite, has been on the slide for the past month, losing about 40% of its value. The company’s losses escalated when shareholders rejected a new capital raising proposal.
The stock is rebounding thanks to the improving underlying business, which was expedited when the firm announced intentions for a vote to add 25 million shares for a fresh capital raising. The retail shareholders, who account for roughly 80% of the company’s shareholding, were opposed to further dilution. However, investors are boosting the stock today in the hopes that the firm will begin to come back.
New Board Chair
AMC Entertainment named CEO Adam Aron, a leisure industry veteran who has embraced AMC’s ardent crowd of retail investors, as its new board chair on Wednesday morning, replacing an executive from the billionaire-controlled Dalian Wanda Group, which sold off nearly all of its stake this year amid the unprecedented rise in AMC’s stock price.
What to look forward to?
On July 29, AMC will hold its annual shareholder meeting, and its next earnings report is expected in early August. Either of these events might provide further information about AMC’s plans for investing the money it recently raised.
What the meme stocks will do next is anyone’s guess. Wall Street gurus have expected a meltdown for months, but meme stocks have held up despite high volatility. Companies will ultimately have to put their capital to work to justify their lofty valuations. It looks that this isn’t the case yet.