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Market Snapshot 📈
S&P 500 (Wednesday’s Close) 4,208.12 +6.08 (0.14%)
NASDAQ (Wednesday’s Close) 13,756.33 +19.85 (0.14%)
FTSE 100 (5 PM IST) 7,032.56 -75.44 (1.06%)
NIFTY 50 (Today’s Close) 15,690.35 +114.15 (0.73%)
USDINR (Today’s Close) 72.89 (1 Year -3.45%)
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🍿 AMC Entertainment: Is Popcorn Behind The Pop?
Shares of AMC Entertainment (AMC) almost doubled in a single day on Wednesday. The trading volume of AMC was 7X its normal levels with 766.5M shares trading hands in one session. Is it possible AMC’s free popcorn offer in the theaters is behind this rally? (Tweet This)
The Meme Stock Mania
AMC Entertainment is the largest movie exhibition company in the world, with over 950 theatres and 10.5K screens globally. Having debuted on Wall Street in 2013 for $18, the price came right back to where it had started within four years.
The pandemic ensured moviegoers change their habits and confine themselves to their homes. Streaming platforms caught the imagination of the home-bound audience and registered spectacular growth levels. Unfortunately, movie theaters faced the brunt of changing consumer preferences.
In the May 24th edition of Crisps, we had highlighted how the video streaming market is poised to double its size between now and 2024. On the other hand, over the entire past decade, the global box office revenue has grown at a cumulative 20%.
No surprise therefore that AMC’s stock fell to as low as $2.2 in April 2020 as theaters were shuttered for most of the year. However, in early 2021 came the famous short-squeeze with stocks such as GameStop, BlackBerry, and AMC seeing gravity-defying gains.
In January, for instance, AMC stock had tripled in a span of five days. This was thanks in no small part to the WallStreetBets forum on Reddit that goaded retail investors to take positions in stocks that were heavily shorted by institutional investors.
What Can Happen In One Day?
At the end of 2020, AMC had debt worth $5.4B. In order to pay down part of this debt as well as to explore acquisition opportunities, the company sold 8.5M shares to Mudrick Capital at $27.12 per share on Tuesday. AMC raised $230.5M as part of this deal. Mudrick promptly flipped all of the shares that very day.
Just one day later, i.e., yesterday, retail investors were back in action, pushing AMC stock up, effectively doubling its price in one day. Talk about timing! Mudrick’s could have been sitting on a cool $600+M had it waited just one more day to sell its holdings in AMC.
For its part, AMC intends to use this cash to explore acquisition opportunities as well as pay down its debt. At the same time, it needs people to swarm to the theaters to keep business going. To this end, the company also announced a free large popcorn to people who enroll on its Investor Connect platform and watch a movie at an AMC theater this summer.
Whether the popcorn announcement excited the retail investors to push the stock up yesterday is anyone’s guess. The company however is trying whatever means it can to bring more footfall to its theaters and it seems to be turning to its retail investors to ensure this. Why wouldn’t it? 80% out of its 3.2M shareholders are retail. It seems like they’re all vying for a bite of the free popcorn.
AMC ended the day at $62.55, up 92.6%.
Company Snapshot 📈
AMC $62.55 +30.51 (95.22%)
Analyst Ratings (10 Analysts) BUY 0% HOLD 60% SELL 40%
Later Today 🕒
- Broadcom Inc. Earnings (AVGO)
- Crowdstrike Holdings Inc. Earnings (CRWD)
- Slack Technologies Inc. Earnings (WORK)
- Netflix Inc. Annual General Meeting (NFLX)
- Nvidia Corp Annual General Meeting (NVDA)
- 6:00 PM IST: Initial Jobless Claims
- 7:15 PM IST: Markit Services PMI (Final)
Fun Fact of The Day 🌞
It takes as little as five days to start a business in the US. The same in Brazil takes 107