THE NEUTRAL ZONE
The movie theater chain AMC Entertainment Holdings Inc. has become the next big target for the activist investor Reddit group Wallstreetbets, which has driven the company’s stock to increase as much as 310%, pulling the theater chain out of its pandemic rut. Bloomberg Intelligence analyst Amine Bensaid compared the meteoric rise to that of GameStop.
“(The stock rise) isn’t based on fundamentals and appears to be similar to the GameStop run-up driven by retail investors,” Bensaid said, “yet could help ease a severe liquidity crunch if the company capitalizes on the jump and issues additional shares.”
One key difference between Wallstreetbets’ push of GameStop stock and that of AMC is the $400 million AMC secured from a European investor, while GameStop had no such boost in liquidity or any changes to its business structure.
“This means that any talk of an imminent bankruptcy for AMC is completely off the table,” said AMC’s CEO Adam Aron. “Today, the sun is shining on AMC.”
Aside from the desire to get rich quickly, Wallstreetbets forum members have expressed a populist desire to disrupt the system by punishing hedge funds they believe have been gaming the system themselves. “Do not sell. Let’s bankrupt another hedge fund!” said one member. Reddit co-founder Alexis Ohanian Sr. echoed that sentiment, tweeting he believes this is an example of “the public doing what they feel has been done to them by institutions. This is an echo of what we’ve seen social media enable the public to challenge institutions for the last decade.” The Redditors’ attempts to sink hedge fund Melvin Capital were curbed after Melvin was granted a $2.75 billion investment by Citadel and Point72 Asset Management to cover their massive short.
The chaotic activity Wallstreetbets has inspired in the stock exchange has prompted several hedge fund managers and SEC officials to call for stricter regulation on trading. Nasdaq CEO Adena Friedman stated that the Nasdaq, which monitors social media, will halt trading if social posts can be linked to changes in stock activity. William Galvin, the top securities regulator in Massachusetts, suggested the NYSE be shut down for 30 days to allow the market to “cool down.”
“I really think at this point it calls upon the regulators, in this case, the New York Stock Exchange, to consider simply suspending it for a month and stop trading it,” he said. “These small and unsophisticated investors are probably going to get hurt by this.”
This section includes an aggregation of articles showing different viewpoints on the topic.
Reddit and Elon Musk sparked a GameStop stock surge. Why AMC and BlackBerry are next – CNET – 1/27/2021
GameStop isn’t just a store that sells video games. It’s also one of the biggest bets Wall Street traders have made lately, with nearly all of them expecting it to fail. That was until Monday morning, when a bunch of Reddit users decided to play the market and push GameStop’s stock up to nearly three times its average over the past several months. Then, they started spreading their strategy to struggling movie chain AMC and once-popular smartphone maker BlackBerry too.
AMC is today’s GameStop. A Reddit mob sent its stock more than 200% higher – CNN – 1/27/2021
Shares of the new WSB plaything were up more than 230% Wednesday after members of the Reddit board were touting the stock and got #SaveAMC trending on Twitter. AMC is struggling financially — just like GameStop — and is a favorite stock of short sellers. AMC wasn’t exactly a top performer before the pandemic, and the massive drop-off in theater attendance over the past 10 months sent it scrambling for cash. Last year, the company said it doubted its ability to stay in business.
AMC Entertainment Stock Recovers All Pandemic Losses, Tripling In Value – Deadline – 1/27/2021
Playing a key role in the upswing has been a flurry of action driven by traders on Reddit, with the #SaveAMC hashtag trending on multiple online platforms. Apps like Robinhood reported outages as user activity surged. While the broader stock markets are significantly down thus far in the session, select shares are seeing astronomical gains. GameStop, the poster child for the phenomenon, soared past $300 a share, extending a recent frenzy fueled by day traders swapping tips online.
AMC is not going bankrupt anymore, according to AMC – Deseret News – 1/27/2021
Back in May 2020, reports surfaced that AMC Entertainment might go bankrupt, especially since the coronavirus pandemic left movie theaters closed down, as I reported for the Deseret News. AMC secured a slight boost from a debt sale and applied for federal aid, which helped. But rumors about bankruptcy have lingered for months now. AMC has reopened its theaters with limited capacity and with face mask requirements, but the lack of new movies means less people are headed to movie theaters.
This section includes an aggregation of tweets showing different viewpoints on the topic.