- AMC moves from cinema to rollercoaster as the stock swings wildly.
- AMC announced a share offering that caused shares to tank 30%.
- Retail fights back, and AMC bounces to close down 18%.
Update June 7: AMC Entertainment Holdings Inc (NYSE: AMC) remains under pressure after a report that Wall Street banks are becoming more cautious in their dealing with “meme-stock.” Extreme volatility has led several institutions to demand more collateral when operating in shares such as AMC, GME, Microvision and others. AMC, the Kansas-based movie theater firm, suffered from two days of losses and closed Friday’s session at $47.91. However, it is essential to note that the equity leaped by 400% in one month.
AMC may as well open up a rollercoaster experience as investors in the stock certainly like the motion sickness from trading in the shares. Or perhaps with all this money they can easily raise they can just buy a few theme parks. Either way, the market appears to be rewarding AMC for raising a bucket of cash as the stock refuses to abide by the normal rules. Traders were buoyed on Tuesday by the announcement that Mudrick Capital had bought shares in AMC, enabling the cinema operator to raise cash and go on the offensive. However, in a late-day twist, Mudrick said they had sold their entire position as they thought AMC to be overvalued, according to Bloomberg. This appears to have emboldened traders on the various social media sites who have pushed the stock to new highs during Wednesday’s premarket. Mudrick reaped a nice profit for a quick trade, and there is nothing wrong with that. The shares were not subject to a lock-up, so Mudrick was free to do as they wished. However, the move continued even as news of Mudrick selling out hit the tape. In fact, the increased attention brought onto AMC from the Mudrick saga appears to have increased the social media discussion rate leading to more and more buying power entering.
Thursday saw the stock surge again in the premarket, but the announcement by AMC of a further share sale hit the share price hard. AMC announced it would sell up to 11.55 million shares to raise further cash and improve the balance sheet. Given the volume and surge in the price, it seemed the obvious thing to do. If the market offers you up free cash, you should take it. Thursday’s share sale was reported by Reuters to have netted the company $587.4 million on top of the $230 million raised from the Mudrick transaction. AMC said the funds raised will be used to repay debt and for potential acquisitions of theatres.
In yet another development, how many sequels can this have, the company has returned to shareholders asking them to authorize the issuance of 25 million new shares in 2022. AMC’s share count is up over 300% since the start of 2020 as the company continually raises cash to fend off the challenges of the pandemic. AMC had filed to issue 500 million new shares, but this plan was dropped in April as shareholders appeared not to be in favour of it. This new plan to issue 25 million new shares was discussed on the Youtube channel Trades Trey, favoured by many of the new retail R/WallStreetBets traders. The CEO is having to draw a fine line between asking for shareholder support, saying “If you arm us with the tool — meaning stock as the tool — to go find value-creating opportunities for AMC shareholders, we can do that. If we are not armed with this tool, then you’re tying our hands behind our back and you’ll make it just that much harder for us to land some of these attractive opportunities that could benefit us all,” and cautioning against the moves in AMC’s share price. The SEC filing contained some strong warnings about the volatility of the share price: “Within the last seven business days, the market price of our Class A common stock has fluctuated from an intra-day low of $12.18 on May 24, 2021 to an intra-day high of $72.62 on June 2, 2021, and we have made no disclosure regarding a change to our underlying business during that period, other than with respect to an additional financing. Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.” A strong statement indeed.
From a technical perspective, the chart has obviously gone parabolic and pretty much blown through all resistances. The pullback has at least shown some level of technical adherence by stalling at the 38.2% Fibonacci retracement seen on the 4-hour chart.
Support at $36.13 is in sight of bears now who have some ammunition from the share sale and further talk of issuing new shares. $36.13 is the high from March 2015 and this level worked well as can be seen from the clean break through on Wednesday. Below that is the 61.8 Fibonacci retracement, perhaps the most-watched of the Fibo levels, at $33.39, this also corresponds with Tuesday’s high and the 9-day moving average.
