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An AMC theater in Burbank, Calif., on March 15.
Valerie Macon/AFP via Getty Images
AMC Entertainment
stock’s meme-fueled run continued on Tuesday after the company said it sold $230.5 million in stock to Mudrick Capital Management. The rally held up even after a report from Bloomberg said the firm promptly sold off its stake at a profit.
AMC stock (ticker: AMC) closed up 23%, to $32.04, on Tuesday. Fellow meme stock GameStop (GME) was up 12%, to $249.02.
According to AMC, Mudrick Capital paid about $27.12 a share for 8.5 million shares—a 3.9% premium to AMC’s close on Friday at $26.10. That appears to have sparked further enthusiasm among retail investors who are betting on AMC stock, while it was bad news for the stock’s many short-sellers.
Mudrick’s bet on AMC was reportedly short-lived. Bloomberg reported, citing a person with knowledge of the matter, that Mudrick sold its entire stake in AMC on Tuesday at a profit, adding that the firm believed the stock was overvalued, trading higher due to “day-trader enthusiasm.” The firm didn’t return a request from Barron’s seeking comment.
Though analysts have argued that meme stocks like AMC and
GameStop
are trading on hype and supply and demand, rather than genuine fundamental analyses, the cash both companies have raised from recent stock sales is real and has helped them sure up their respective balance sheets amid the pandemic. On Twitter, AMC CEO Adam Aron said he sees opportunities for AMC to acquire theaters from struggling competitors.
“In our view, this is not mindless dilution, but rather this is very smart raising of cash so that we can grow this company…to many of you on Twitter, to grow YOUR company,” Aron said, addressing AMC’s many fans on social-media sites like Twitter and Reddit. “Watch out naysayers, $AMC is going to play on offense again. Here we come!”
Aron added, “With this agreement with Mudrick Capital, we have raised funds that will allow us to be aggressive in going after the most valuable theatre assets, as well as to make other strategic investments in our business and to pursue deleveraging opportunities.”
Even as AMC stock continued to rocket higher, Loop Capital Markets analyst Alan Gould reiterated a Sell rating and a $1 price target on Tuesday. He argued the company has survived the pandemic, but is now “massively diluted and over-levered.”
“Eventually the valuation will reflect the fundamentals,” Gould wrote. “We expect this to occur by the time box office returns to normal, sometime over the next year, when shareholders recognize what little cash flow per share remains for the equity holders after debt expense; we just don’t know the path of the stock price between now and then.”
Indeed, analysts haven’t had much luck trying to call a top in meme stocks. With its Tuesday gains, AMC yet again set a 52-week high and is now up 503% from a year ago. GameStop, meanwhile, is up 5,930% from 12 months ago.
Write to Connor Smith at connor.smith@barrons.com
