With its share price up more than 280% in the last five days alone, management of AMC Entertainment (NYSE:AMC) plans to sell nearly 12 million shares to repay debt and finance future acquisitions. AMC stock nearly doubled in price yesterday.
A filing to sell 11.55 million shares at-the-market seems targeted at retail traders clamoring to get on the rocket ride that AMC stock has become this year. Typically, companies sell in traditional offerings that are purchased mostly by institutional investors.
However, the company is warning investors that their stakes could blow up. “The market prices and trading volume of our shares of Class A common stock have recently experienced, and may continue to experience, extreme volatility, which could cause purchasers of our Class A common stock to incur substantial losses,” AMC said in the filing.
AMC is thriving on Reddit now, with many posters on r/WallStreetBets rooting for the movie theater operator to come out of the pandemic stronger than ever. AMC stock rocketed on Wednesday, closing higher by nearly 100%.
The impressive gains follow a broader resurgence of short-squeeze hopes, as well as a few specific catalysts. AMC has been riding higher on Covid-19 reopening plans, as Memorial Day Weekend proved that consumers were ready to get out and head to the movie theater. Additionally, a $230 million cash injection and a shareholder engagement program are also sweetening the deal for AMC stock.
AMC Stock Sale Just Latest From ‘MVP CEO’
Just yesterday, InvestorPlace’s Luke Lango called AMC’s chief, Adam Aron, the company’s MVP. Aron “knows exactly what he’s doing” when he has been tweeting frequently, voicing his own enthusiasm for the company’s future, Lango wrote in his Hypergrowth Investing newsletter.
AMC plans to use these funds to create more value for the company by acquiring leases for new theatres and improving its existing locations — “With our increased liquidity, an increasingly vaccinated population and the imminent release of blockbuster new movie titles, it is time for AMC to go on the offense again.”
Lango observed that “meme stocks may not stay with us as long as other, more reasonable stocks, but we predict this ‘us versus them’ retail investor mentality won’t die out anytime soon.”
On the date of publication, Robert Lakin did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
InvestorPlace contributor Robert Lakin is a veteran financial writer and editor, including previous stints with Bloomberg News and as a buyside equity research editor. His Substack newsletter, TLV Strategist, covers the Israel business scene.