Theater chain nearly triples in value since Monday as Reddit investors rally behind it
AMC Theatres’ wild run continued on Friday, with the nation’s largest cinema chain seeing its stock price soar 53.7% to close the day at $13.26 per share. The Wall Street surge coincided with Robinhood, the popular stock trading app, reversing its decision to block users from trading AMC and other popular “Reddit stocks” on Thursday, with the app on Friday allowing “limited” AMC purchases.
AMC’s Friday spike capped off a big week for the company. A week ago, AMC was trading below $5 per share and on the verge of running out of cash. Those cash concerns were alleviated on Monday, though, when AMC announced it had raised $917 million to fight off bankruptcy. That cash infusion, coupled with the support of users on Wall Street Bets, a popular Reddit forum, helped propel the company 180% higher by the end of the week.
The Friday spike also stands out considering what had happened a day earlier. AMC shares closed Wednesday hovering near $20 per share, but those gains came crashing down for investors on Thursday, after Robinhood blocked a handful of companies, including AMC, GameStop and BlackBerry, from being bought. AMC shares, after closing at $19.90 a day before, finished Thursday trading at $8.63 per share.
A look at AMC’s 1-week stock chart, via Google
RobinHood CEO Vlad Tenev, in an interview with CNBC on Thursday night, said the app restricted trading “in order to protect the firm and protect our customers.” That explanation did little to satiate AMC shareholders, though, who were irate that the app was only allowing users to sell shares of the company on Thursday; the phrase “F– Robinhood” quickly gained traction on Wall Street Bets in the aftermath.
On Friday, after raising an emergency $1 billion on Thursday night, Robinhood reinstated “limited” AMC and GameStop buying. Afterwards, many Wall Street Bets users implored each other to hold or buy more AMC shares, aiming to push the stock higher and trigger a short squeeze against hedge funds that have bet against it.
It’s unclear how AMC’s business plan is impacted by the recent stock run. The cinema chain’s finances have been decimated by the COVID-19 pandemic and the company still faces a barren box office slate as it moves into 2021. Reuters reported on Thursday it was considering raising more capital, and CNBC’s Jim Cramer on Friday called on AMC CEO Adam Aron to “sell a billion dollars worth” of stock to “fix the balance sheet until covid is tamed.” AMC has more than $5 billion in debt, even after Silver Lake Group LLC elected to convert $600 million in debt into equity on Thursday.
For more details on how GameStop and AMC are part of a “David versus Goliath” battle between Reddit true believers and hedge funds betting against their success, click here.
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