AMC Expands Rise As Reddit’s Retail Frenzy Reaches New Heights
(Bloomberg) – AMC Entertainment Holdings Inc. extended the surge in pre-market trading on Wednesday as Reddit’s retail army continued to gorge on stocks, sending it to heights that have left professionals of Wall Street puzzled.
After rising 95% to a record high in the last regular session, AMC gained 13% to $ 71.01 at 4:02 am in New York City. The losing movie theater chain has a market value of over $ 30 billion, making it more valuable than at least half of the companies in the S&P 500.
While most financial commentators agree that the stock has moved away from traditional investing fundamentals, they are less sure why. Some cite an abundance of cash and savings created during the pandemic, while others point to the impact of social media in providing a platform for small investors to encourage each other.
“Of course their valuation is disconnected from the fundamentals, prices are more a reflection of the impact of social networks,” said Sylvain Goyon, strategist at Oddo. “Stocks go up with the hype and die without it.”
The latest meme market frenzy seems to have an even bigger dynamic than GameStop Corp’s. in January. Some Twitter users said they received text messages from family members urging them to buy AMC stocks as a way to get rich, while others gathered around street corners with homemade posters saying “AMC 2 Da Moon ”and promoted actions at poolside parties.
As of Wednesday’s close, AMC stock had almost risen 30-fold since the start of this year, far exceeding GameStop’s 15-fold increase. Going back to early 2020, shares recently outperformed Zoom Video Communications Inc., whose video conferencing technology has become ubiquitous during the pandemic.
Just a few months ago, AMC was on the verge of bankruptcy as the pandemic closed theaters across the United States. Its market capitalization was only $ 216.8 million in April of last year. Even after January’s brief increase, many professional investors still poop that anyone on Reddit’s WallStreetBets forum could be taken seriously, let alone move the market in a sustainable way.
“The meme equity phenomenon is coming back in force after a two-month hiatus,” said Charles-Henry Monchau, CFO and CIO at FlowBank SA.
AMC announced this week that it will reward little supporters with freebies such as special screenings and free popcorn. He also took advantage of dazzling gains to raise $ 230 million directly from one of his main creditors, Mudrick Capital Management, and consolidate his finances.
“When a new stack, triggered by the free popcorn offer, leads to a doubling of the share price in just one day, it shows a huge disconnect between price and underlying value,” Susannah Streeter , senior investment and markets analyst at Hargreaves Lansdown, said via email.
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