AMC has unveiled plans for a large new share sale, the cinema chain’s latest move to cash in on the “meme stock” trading fervour that has sent its market value surging 600 per cent in the past month.
The announcement comes a day after AMC’s promise to provide free popcorn to its investors, and two days after the company raised $230.5m by selling 8.5m new shares to the hedge fund Mudrick Capital Management.
The latest announcement said AMC may sell up to 11.55m shares of common stock, with proceeds going towards general corporate purposes such as refinancing its debt or buying new theatres.
The company cautioned, however, that the “recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals”.
News of the free popcorn for shareholders — an effort by the company to engage more closely with day traders — sent the shares up 95 per cent on Wednesday in heavy volume.
“Under the circumstances, we caution you against investing in our class A common stock unless you are prepared to incur the risk of losing all or a substantial portion of your investment,” AMC’s Thursday filing with the US Securities and Exchange Commission said.
Last summer, car rental company Hertz, another stock that individual investors sent surging, abandoned its plans for a $500m share sale after facing scrutiny from US securities regulators. The group had warned investors that the group’s equity value was likely nil as it was in bankruptcy proceedings at the time.
AMC has sought to use a flood of buying by individual investors to shore up finances that were severely strained by the coronavirus crisis, which shut cinemas around the world.
News of the new fundraising plan caused AMC shares to fall as much as 20 per cent in pre-market trading before rebounding. Shortly before the opening bell they were down about 8 per cent.
At Wednesday’s close, AMC’s market value was $31bn, up from $4bn at the same time last month.
Meme stocks, favourites of retail investors who swap stock tips on social media, captivated Wall Street in the first two months of 2021. After a period in which volumes in these shares appeared to be easing, the frenzy has picked up again in recent weeks.
Technology group BlackBerry closed up 32 per cent cent on Wednesday and rose a further 13 per cent in pre-market dealings in New York. The retailer Bed Bath & Beyond, which closed up 62 per cent in the previous session, pulled back around 11 per cent shortly before the opening bell.