AMC latest “meme” stock to hit a rally, jumping 17% after selling shares to investor
NEW YORK, N.Y. / CNBC — AMC Entertainment shares surged again on Tuesday when the theater chain sold more than 8 million shares to an investment firm, the latest in a series of capital raises for the struggling company turned ‘meme’ stock.
The purchase by Mudrick Capital Management helped AMC raise $230.5 million. AMC officials said that they would be using the funds for potential acquisitions, updates to existing theaters, and deleveraging its balance sheet.
Shares were up 17% in premarket trading.
AMC was hit hard during the pandemic when their movie theaters shut in most of the country for months and major studios delaying releases during the last year.
Even though business and profits were declining, the stock became a favorite of traders on Reddit and has seen wild swings recently.
The shares doubled last week as message board chats drove up the stock price.
The company has taken advantage of those price surges by selling additional shares to raise cash. The stock is up more than 1,000% year to date.
“Given that AMC is raising hundreds of millions of dollars, this is an extremely positive result for our shareholders,” CEO and President Adam Aron said in a filing. “It was achieved through the issuance of only 8.5 million shares, representing less than 1.7% of our issued share capital and only a small portion of our typical daily trading volume.”
AMC is about $5 billion in debt and needs to defer $450 million in lease repayments as its revenue largely dried up during the pandemic. Theaters were closed for months to slow the spread of COVID-19. When they re-opened, few customers felt safe attending screenings.
Now, vaccination rates continue to climb and the number of COVID-19 cases are on the decline. Causing consumer confidence in returning to movie theaters to spike. Not to mention, movie studios are finally releasing new content.
Over the weekend, John Krasinski’s “A Quiet Place Part II,” the sequel to his 2018 blockbuster, garnered $48.4 million over Friday, Saturday, and Sunday, the highest three-day haul of any film release during the pandemic.
Still, while initial box-office receipts are promising, fundamental elements of the movie theater business have changed in the last year, including theater capacity, shared release dates with streaming services, and the number of days that movies play in theaters.
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