Topline
Shares of Kansas-based AMC Entertainment, the world’s largest movie theater chain and one of the original meme stocks embroiled in recent retail trading mania, were on a tear Monday, at one point surging nearly 30%, after the firm’s largest shareholder disclosed it had ceded its majority control–a welcome move for Reddit traders emphatically plowing into the stock.
The AMC Empire 25 movie theater in Times Square.
Key Facts
AMC shares ended the day up 26%, tacking on about $990 million in market value as shares traded hands a staggering 250 million times–more than double the volume on Friday.
The stock surge kicked off after an overnight report Sunday detailing that Dalian Wanda Group Co., a Chinese conglomerate founded by billionaire Wang Jianlin, had quietly cut its stake from more than 30% in early December to less than 10% as of March 3.
“With no controlling shareholder in place, now, AMC will be governed, just as most other publicly traded companies, with a wide array of shareholders,” AMC CEO Adam Aron said in a statement about the move.
Reddit traders, who’ve helped drive much of the near-600% surge in AMC shares this year, celebrated the surge: “Held AMC this entire time and finally just broke even,” one investor on the popular r/WallStreetBets board said at about 11 a.m. Monday, as shares traded for about $14–a level unseen since the stock’s meteoric high of $19.90 in late January.
Even before Monday, AMC shares have been resurgent after tanking with other meme stocks in early February, climbing about 98% in the month through Friday as analysts up their price targets to reflect bullishness that the chain’s terrible financials can recover as the pandemic subsides (just this weekend, two flagship locations in Los Angeles reopened).
That said, experts still aren’t keen on current prices, which are about four times the average analyst price target of $3.50; though he upped his price target to $7 (after a better-than-feared earnings report), B. Riley Securities analyst Eric Wold on Thursday said he expects AMC’s attendance rebound could push into next year.
Crucial Quote
“For months, analysts (like myself) worried that Dalian Wanda… could use its 64.5% voting share to self-deal,” Thomas Yeung, an analyst at InvestorsPlace Markets, wrote Monday. “With the threat of that now gone, the future of AMC stock now rests in Reddit investor hands.”
Key Background
The pandemic has been terrible for the leisure space, and particularly bad for the world’s largest movie theater chain. Despite beating analyst expectations with its fourth-quarter earnings report on Wednesday, the firm’s total revenues of about $1.2 billion last year were just 23% of the sales it pulled in 2019. There has, however, been good news in recent weeks. Wold says nearly all of AMC’s nearly 600 domestic locations should be open in the next week or so, and the nearly 400 international locales should follow suit by May. Any uptick in sales will be necessary to help AMC pay back the roughly $5.7 billion in debt it recorded on its balance sheet at the end last year–after raising about $1.2 billion during the pandemic just to stay afloat.
Tangent
AMC isn’t the only recently resurgent meme stock, a crop of names that skyrocketed in late January at the hands of Reddit traders pumping up the prices of heavily shorted companies. Though it plunged about 15% Monday (not unlike its recent volatility), shares of GameStop are still up more than 300% in the past month.
What To Watch For
AMC stock benefited from the firm’s earnings report last week, but it’s very unclear how GameStop will fare when it posts its quarterly results next Tuesday.
Further Reading
Amazon, Six Flags, Square: Here Are The Stocks Ready To Rise Thanks To New Stimulus Checks (Forbes)
Dow Jumps 150 Points, Adds To Record High Despite Threat Of Increased Taxes (Forbes)
