sells more shares. The stock fell so much on Thursday morning that it triggered a halt in volatility.
AMC on Thursday filed a request to sell 11.6 million shares at market prices. The stock of memes – which nearly doubled on Wednesday – fell on the news.
AMC said it would use any proceeds from the sale for “general business purposes, which may include repayment, refinancing, repayment or redemption of existing debt, acquisition of movie assets, working capital or capital expenditures and other investments “.
The company said earlier this week that it sold 8.5 million shares to investment firm Mudrick Capital, which reportedly sold its stake at a profit on the same day. At the time, AMC CEO Adam Aron called the sale of shares not a senseless dilution, but a “very smart fundraising so that we can grow this business.”
AMC stock fell about 28% to $ 46.20 after resuming trading Thursday morning. The title was up about 20% in trading before the filing.
The drop follows an incredible run for AMC shares on Wednesday that pushed the movie channel’s market cap above
‘s (GME), its counterpart in the memes business. The rallies in both stocks brought down sharply short sellers who bet against them.
AMC stock rose 95% to $ 62.55 on Wednesday, raising its market cap to $ 28.17 billion. GameStop jumped 13% to $ 282.24, reaching a market cap of $ 19.97 billion. Shares of both companies rallied amid heightened short interest, option volume and retail trader enthusiasm.
Ihor Dusaniwsky, managing director of short sale analysis firm S3 Partners, said Barron he estimates that AMC’s short interest was recently 90.87 million shares, or about 18% of the shares available for trading. It sets GameStop’s short interest at 11.31 million shares, or 19.8% of the free float.
Dusaniwsky said short sellers betting against AMC were down $ 2.77 billion on Wednesday alone, bringing cumulative losses to more than $ 5.22 billion. For GameStop, he estimates a loss of $ 375.7 million on Wednesday and $ 7.15 billion in 2021.
The other memes stocks that jumped on Wednesday were mixed on Thursday.
Bed bath and beyond
(BBBY) the stock was down 9%,
Shares (BB) were up 17% and GameStop was down 4.7%.
The recent resurgence of memes shares has once again captured the general public’s attention on Wall Street. On Reddit investment forums such as WallStreetBets and AMCStock, the recent action has been celebrated as a win for the average person. But not everyone was so enthusiastic.
“I never would have believed it, but the recklessness of a segment of retail investors seems to have no limits in this market,” Whitney Tilson of Empire Financial Research wrote in a note Wednesday. “This type of short-term rally is to be expected, and for stocks like these, this is an opportunity to add to a short or sell position as this is clearly a dead rebound.”
David Trainer, CEO of investment research firm New Constructs, wrote that AMC’s business was moving in the wrong direction before the pandemic. Since then, he noted that AMC had diluted existing shares through millions of share sales, adding that the share was worthless given its leverage and low earnings outlook.
“The surge in AMC Entertainment stocks is another sign of the reckless equities-driven investment landscape we find ourselves in today,” Trainer said. “Wall Street insiders are attacking the naivety of retail equity traders. There is no fundamental reason to buy shares of AMC Entertainment.
What awaits investors is to be guessed. Calling a summit for memes stocks has been a wild ride this year. But eventually, the fundamentals will have to catch up with the valuation.
Write to Connor Smith at [email protected]