UPDATED with broader market movement, closing prices. Shares of AMC Entertainment have skyrocketed 301% on a wild trading day, recovering to levels not seen since long before the coronavirus pandemic.
Broader stocks plunged in one of the market’s worst sessions in months as mixed earnings and frenzied trading sparked concerns of a potential new bubble along with ongoing jitters over the pace of the vaccine rollout. An additional headache was news from the Federal Reserve that it would take a wait-and-see approach on the economy, even though it conceded it has softened. The Dow Jones Industrial Average slumped 2% to 30,303.17, within sight of the vaunted 30,000-point barrier. The damage was worse on the tech-heavy Nasdaq, which retreated 2.6%.
‘GMA’ Co-Host Michael Strahan Tests Positive For Covid-19
AMC closed at $19.90, its highest point since the heady days of 2018, the year domestic box office set an all-time record.
Reddit and a massive new crop of day traders and small investors emboldened during the pandemic catapulted heavily shorted stocks like GameStop, AMC and a few others up by multiples of hundreds. Wall Street pundits fretted about stocks being driven higher by inexperienced retail investors egging each other on via social media.
The #SaveAMC hashtag trended on multiple online platforms. Apps like Robinhood reported outages as user activity surged and other trading platforms halted action on AMC. GameStop, the poster child for the phenomenon, has soared to $347.51 from just $17.69 at the start of January, extending a recent frenzy fueled by day traders swapping tips online.
Short positions also are a consideration and often prompt fluctuations in certain stocks. Individual investors, using Reddit and other online platforms, have piled into heavily shorted stocks like AMC, creating “short squeezes” for hedge funds and others betting the other way.
Other exhibition stocks like Cinemark, National CineMedia, Marcus Corp. and Imax also posted gains, and there has been some legitimately upbeat news for the theater business lately that can’t be completely discounted. While delays in the vaccine have meant an extended hibernation for theaters and another wave of release date shuffles, an influx of 200 million vaccine doses by summer has been promised by President Biden. Theaters have recently reopened in a few pockets of the country, including key markets like Chicago.
If AMC’s gains can be sustained, the largest movie theater chain in the world will have a head start on what would be a remarkable comeback. Overall box office revenue plummeted more than 80% in the U.S. in 2020 due to the pandemic and major markets like LA and New York have been closed since last March.
The company, backed by China’s Wanda Group and U.S. private equity firm Silver Lake, has long had a sizable debt load. The debt worries were compounded by revenue completely disappearing in 2020. Liquidity issues have remained a serious concern, with bankruptcy a looming scenario, though the company has shored up more than $900 million in fresh cash and CEO Adam Aron says it has ample liquidity to last through the latter part of 2021.