Street performers in Minnie Mouse costumes pass outside an AMC movie theater in New York’s Times Square at night, October 15, 2020.
Amir Hamja | Bloomberg | Getty Images
According to data from S3 Partners, investors short of Meme stock AMC Entertainment lost an estimated $ 1.23 billion last week, as the stock is up more than 116% since Monday.
The rally cooled off late Friday after AMC stock shot up as much as 38% during early morning trading. Shares closed at $ 26.12 per share on Friday, down from $ 13.68 on Monday. At its peak, the stock hit $ 36.72 per share.
AMC was by far the most active stock on the New York Stock Exchange on Friday as more than 650 million shares changed hands. According to FactSet, the average 30-day trading volume is just over 100 million shares.
With 450 million shares outstanding, the entire company changed hands nearly 1.5 times during Friday’s trading.
So-called short coverage could add to AMC’s massive rally this week. The company has short about 20% of its outstanding shares compared to an average short 5% of a typical US stock, S3 Partners said.
When a heavily short stock bounces up quickly, short sellers are forced to buy back borrowed stocks to close their short position and reduce losses. The forced purchases tend to fuel the rally even further.
AMC’s new private investors, who total 3.2 million, owned approximately 80% of the company’s 450 million shares outstanding as of March 11, AMC reported earlier this month. Their efforts, which skyrocketed in January, saw the stock rise from $ 5 to $ 20 per share and allowed AMC aims to reduce its debt burden by around $ 600 million.
The retail investor agenda was to keep AMC alive and “stick” it to the hedge funds, an analyst told CNBC.
AMC shares have risen more than 1,100% since January, contradicting the predictions of Wall Street analysts. AMC’s business was under extreme pressure. The company has roughly $ 5 billion in debt and has had to defer lease repayments of $ 450 million as its revenues largely dried up during the ongoing coronavirus pandemic. Theaters were closed for several months to stop the virus from spreading, and when the company reopened its doors, few consumers were comfortable attending screenings and film studios withheld new releases.
As the cinema business recovers, AMC continues to face strong headwinds. Although the company ended the first quarter with $ 1 billion in liquidity, the highest liquidity in its 100-year history, that cash will only keep it afloat until 2022 unless audiences return in droves Balance months with no income.
While early box office revenues are promising, fundamental elements of the cinema business have changed over the past year, including cinema capacity, joint release dates with streaming services, and the number of days that movies are shown in theaters.
“Anything that’s really important here in the long term, this company will never make money again,” said Rich Greenfield, co-founder of LightShed Partners, on CNBC’s “Squawk Box” Friday morning. “You will never make money with your current capital structure. Before the pandemic, it was trading at seven times EBITDA. It is currently trading at 25 times EBITDA and is now in a worse position with the changed industry. That simply contradicts all logic . “
On the last day of 2019, AMC had a market value of $ 751.87 million. On Friday, that figure was around $ 11.9 billion, according to FactSet.
– CNBCs Yun Li contributed to this report.