AMC Entertainment, the firm that has recently piqued Wall Street’s interest, had its shares rise double digits on Monday as a consequence of retail traders’ speculative trading. This came as investors were betting against the stock by selling short, and the corresponding short squeeze also contributed to the rise.
Retail traders, notably Redditors on Reddit’s WallStreetBets community, have invested in “meme stocks.” These meme stocks are usually businesses that have been failing in the stock market until a celebrity or retail trader decides to invest in them. The stock price rises as a result of everyone else buying it.
AMC Entertainment has surged 465.20% in the past month and also posted a 46% increase within five days. AMC saw its stock soar to $59.50 per share on Monday however the soar met some resistance putting the price at $55.05 with a decline of 5% at the time of writing this article. On WallStreetBets, AMC has dethroned former meme stock, Gamestop as the most popular stock.
Enter the meme-stock craze, in which investors invest based on celebrity or message board recommendations, regardless of the company’s underlying merits. Traders are flocking to purchase equities just because their colleagues are doing so. These small-time traders frequently pushed one another to buy stocks and call options.
Movie theatres have begun reopening and this should provide AMC with some much-needed revenue. Its first-quarter revenue fell by more than 84 percent to $148.3 million. Remember that governments began imposing limitations on business and movement in March 2020, a year ago, as a result of the pandemic’s impacts.
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However, AMC and other theatre operators face a more tough climate, with additional viewing choices competing for customers’ dollars. 2019 revenue barely increased to $5.5 billion, with falling attendance contributing to a 2.5 percent drop in entrance revenue to $3.3 billion. Movie fans now have more options than they had in the past. Many streaming services, including Netflix (NASDAQ:NFLX), Walt Disney’s (NYSE:DIS) Disney+, and AT&T’s (NYSE:T) HBO Max, are available to them.
Investors are in a precarious situation as a result of the stock’s rise. AMC is up against stiffer competition, which means it will have to compete for moviegoers. While it was able to offset some of the earlier attendance decreases by raising ticket and concession prices, given the new scenario, this will be more challenging.
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Over the last seven months, the corporation has registered to issue hundreds of millions of shares. Mudrick Capital acquired 8.5 million freshly issued shares from AMC on June 1st, then sold all of them on the open market for a profit the next day.
Before the opening bell, AMC filed the securities documentation for the transaction, prompting the stock price to jump and Murdick to sell. Also, keep in mind that AMC has already registered to sell shares directly to the public on numerous occasions before their most recent filing; once on April 27th (43 million shares) and once on December 11th (178 million shares).
Clearly, the corporation has a ravenous taste for cash, and with good reason: revenues in 2020 are expected to be 46 percent lower than in 2012. Yes, 2020 was a very challenging year, but revenues were also flat compared to 2018 and 2019. Despite this, AMC is up slightly about 2,600% year to date.
Over the last seven months, the corporation has registered to issue hundreds of millions of shares. the company warned in a Securities and Exchange Commission filing.
It’s difficult to sit on the sidelines and watch a stock price rise. However, given AMC’s uncertain future, this is most certainly the right course of action. It is worth mentioning that home run streaks do come to an end.