AMC Leisure inventory is up 40% as Reddit sellers double
AMC Entertainment’s shares rose another 40% Thursday as speculative trading activity in the cinema chain’s stock skyrocketed among Reddit-owned day traders.
The stock rose as much as 47% on Thursday afternoon and has increased its gain since the beginning of the week to a whopping 135%.
AMC has overtaken GameStop and is the most popular stock on the infamous WallStreetBets Reddit forum according to Bank of America’s analysis of share mentions on the platform.
With its massive rally on Thursday, AMC turned its back on its meme stock peer GameStop, which made history on Wall Street in January with a 400% short squeeze in a week. GameStop’s shares rose just 0.6% on Thursday after rising 15% in the previous session.
One of the trending posts on the WallStreetBets chat room said “AMC missile ship” on Thursday while another said, “I’ve invested all of my savings in AMC !!! Wish me luck folks.”
So-called short coverage could add to AMC’s massive rally this week. According to S3 Partners, the company has shorted around 20% of its float stocks compared to an average of 5% short in a typical US stock.
“AMC short sellers have recently covered some of their exposure, reversing their short selling trend earlier in the month,” said Ihor Dusaniwsky of S3 Partners.
When a sharply shortened stock bounces up quickly, short sellers are forced to buy back borrowed stocks to close their short position and reduce losses. The forced buy tends to drive the rally even further.
Short sellers betting against AMC have suffered a $ 1 billion loss this week alone, according to the data.
Wall Street analysts are stunned by AMC stock’s surge of more than 1,200% since January. The company, which has approximately $ 5 billion in debt and $ 450 million in deferred lease repayments, saw its revenue decline sharply due to the ongoing coronavirus pandemic.
As the cinema business recovers, AMC is still facing strong headwinds. Although the company ended the first quarter with $ 1 billion in liquidity, AMC will only stay afloat through 2022 if theaters can do a significant portion of the business they did in 2019.
In the first quarter, AMC had revenues of $ 148.3 million, a decrease of 84.2% from the same period last year. Net loss decreased from a loss of $ 2.18 billion, or $ 20.88 per share, to $ 567.2 million, or $ 1.42 per share, for the quarter.
Although AMC had significantly lower sales in 2021, AMC’s valuation has nearly tripled thanks to these new retail investors. On the last day of 2019, AMC had an enterprise value of $ 5.8 billion, on Wednesday that value was around $ 13.4 billion.
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