chain has pivoted back to an offensive strategy on a bet that its retail investors will stick with the company long enough for it to recoup its pandemic losses.
For months, new fans of the stock, who call themselves “apes,” have been threatening analysts who have suggested that AMC’s stock is overvalued. The apes have remained bullish on traditionally heavily shorted stocks and have used their growing numbers to make waves on Wall Street. Some have verbally assaulted the analysts, who have been warning that the debt-burdened company could ultimately go bankrupt, rendering the stock worthless.
Last week, AMC shares spiked more than 116% from Monday to Friday, closing at $26.12. The stock has surged more than 1,100% since January.
But rather than seeing the strong Memorial Day weekend box-office performance as a signal that it could get its finances back on track or focus on paying down its massive debt, the company said it would double down on future investments. In doing so, AMC’s management is making a risky bet that these retail investors will continue to prop up the company.
Shares of the stock surged Tuesday after the theater chain sold more than 8 million shares to Mudrick Capital Management. AMC said in a securities filing that it raised $230.5 million through the stock sale and would use those funds for potential acquisitions, upgrading its theaters and deleveraging its balance sheet. Mudrick also invested in AMC in December.
On Tuesday, Bloomberg reported that the firm had sold off all its shares.
Representatives for Mudrick did not immediately respond to CNBC’s request for comment.
“Given our scale, experience and commitment to innovation and excellence, AMC is being presented with highly attractive theatre acquisition opportunities. We are in discussions, for example, with multiple landlords of superb theatres formerly operated by Arclight Cinemas and Pacific Theatres,” said CEO Adam Aron in the filing.
In pre-Covid times, AMC focused heavily on growing its footprint and upgrading its theaters in order to generate revenue. But many would have expected the pandemic to have changed its position. The health crisis shuttered theaters for months. With no money coming in from ticket sales and concessions, AMC fell behind on its rent. It had to scurry to raise money just to get by. AMC had been on the brink, which drew in short sellers, who doubted the company would weather the storm.
But it did, partially because of the apes, who swooped in and drove up the stock price. That allowed Aron to capitalize on the interest in the stock to raise funds. Tuesday’s announcement shows he’s not flinching from being opportunistic again.
Other companies in AMC’s situation would make debt repayment its top priority for the next year. But instead Aron’s turning back to M&A, which is how the company became the nation’s largest theater chain. Aron added Carmike, Odeon and Nordic shortly after taking the role of CEO in 2015.
“The retail investors seem to have an agenda, which is to keep AMC alive, while sticking it to the hedge funds, and hopefully make a lot of money in the process,” said one Wall Street analyst, who asked not to be named. “They want to democratize the stock market, and remove power from the wealthy.”
And so far, the strategy is working. Short sellers are estimated to have lost $1.23 billion in AMC last week.
The biggest question is: How long can it last? AMC’s bet is that the retail investors will stay interested in the stock long enough for its business to stabilize.
Wall Street analysts have described these new investors as uneducated and emotional. Since the January stock surge, some have used social media to attack anyone who shares negative opinions of AMC. In particular, analysts who have “sell” ratings or suggested AMC’s stock is overvalued have been fending off Twitter attacks and angry phone calls to their offices. These remarks have gone beyond mere criticism. In some cases, police have been notified about threats. CNBC has reviewed hundreds of messages sent to analysts that contain harassing language and graphic images.
Representatives for AMC did not immediately respond to CNBC’s request for comment.
Rise of the AMC ‘apes’
Rich Greenfield, partner at LightShed, a technology, media and telecommunications research firm, has borne the brunt of the ire both publicly on Twitter and Reddit forums and through private messages, phone calls and emails.
“I hope you go bankrupt you self-serving little b—-,” one AMC investor messaged Greenfield.
“I’m increasing my position by $10k tomorrow just because I don’t like Rich Greenfield’s face,” another wrote on Reddit last Tuesday.
In another message shared with CNBC, an AMC investor sent Greenfield a photo of a gorilla having sex with another gorilla that had Greenfield’s face photoshopped on it.
To be sure, not all AMC retail investors are participating in this campaign. Many have discouraged this behavior, calling on those who are harassing analysts to stop. However, the continued deluge of messages has led Greenfield to involve the police and to make his account private.
“It’s one thing to disagree and say ‘you are wrong,’” Greenfield said. “It’s another thing to attack everything about you.”
These messages are a response to Greenfield’s March downgrade of AMC in which he gave a 12-month price target of just 1 cent.
“It will never generate cash again,” Greenfield said on CNBC’s “Squawk Box” on Friday. “That’s why we have a one-penny price target is that this company is headed for bankruptcy. The only choice it has is to issue hundreds of millions of shares.”
