The commercial frenzy that has driven the actions of AMC Entertainment Corp. by more than 600% during the year so far it may have saved the film operator from bankruptcy, but the company still faces formidable challenges after being hammered by the coronavirus pandemic.
AMC AMC,
is one of many stocks that have been swept away in the short run by the stock of video game store GameStop, which has shot up more than 1,600% in the past two weeks amid investor support on the RedSit WallStreetBets message board.
These same investors are urging each other on the current Reddit issue for AMC to be the next GameStop GME,
to create a small compression that will “take him to the moon,” telling others to “buy and hold and not sell.”
Like the other names caught in this speculative frenzy, AMC has had a high short-term interest rate as a percentage of the float, which stood at around 69% according to the latest data, despite the sale of shares on Monday. will reduce that percentage.
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Shares of the world’s largest film chain rose another 250% on Wednesday, becoming the biggest winner of major U.S. stock markets. With a volume that rose to more than 1 billion shares, the shares were also the ones most actively traded on the day, although there was no new news driving the move.
AMC has just seen a year during which many of its theaters were closed or operating at low capacity and major studios refrained from releasing new blockbusters. The outlook for 2021 is not much better, according to Eric Schiffer, chief executive and chairman of the patriarch’s organizational and organizational consultants and restructuring expert.
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“Most people wouldn’t want to put themselves in an indoor space for hours when there are variants (of COVID-19 coronavirus disease) against which vaccines can’t even inoculate,” Schiffer said. “The viability of the business before the inflation of market shares has not altered the calculation. If they survive, it will not be the same business. It will take years to recover where they were. ”
AMC took advantage of the sharp rise in the price of its shares by timely taking advantage of the equity and debt markets, raising another $ 917 million this week that CEO Adam Aron described as the sun shining on AMC.
“I have 917 million reasons to be a smiling man,” Aron told MKM analyst Mike Hickey. “It brings us to 2021. With any kind of partial recovery of the film industry, this will take us to 2021. The impending bankruptcy is completely off the table. We believe we have the clue we need to overcome this pandemic.”
Mike O’Rourke, chief market strategist at JonesTrading, noted this week that AMC’s $ 5.6 billion market capitalization is almost double that before the pandemic. At the same time, its stock count has risen to 337 million, from 58 million in October.
“Management deserves credit for timely harnessing the environment to pool resources to prevent bankruptcy,” he wrote.
AMC did not respond to requests for comments by email and phone. The Securities and Exchange Commission rejected comments. GameStop has not responded to any comments.
Schiffer said the company has yet to pay its bills and manage its network of 1,000 theaters and 11,000 screens worldwide. The company posted a loss of nearly $ 1 billion in the third quarter as revenue declined to $ 119.5 million, up from $ 1.317 billion in the previous period. Its loss per share was about twice what Wall Street expected, as reopening efforts were, at best, reluctant.
So is this group of Reddit investors supporting a wrong horse?
“Certainly that’s not rational, it’s the Fed-driven, crazy, cold-weather markets,” Schiffer said. “Investors are chasing returns because rates are so low … you’ll see periods that seem crazy … and AMC is overrated because of the Internet-driven shake of shorts and these aggressive packaged traders … This it’s the power of the internet, ”he said.
The frantic trade in AMC may have had an unwanted effect on the shares of a similar sound company, AMC Networks AMCX,
the cable network behind the hits including “Mad Men” and “The Walking Dead.” These shares, which are listed under the “AMCX” marker, fell 16% on Wednesday, while remaining 129% in the last three months.
AMC Networks also has a high percentage of short interest as a percentage of floatation, approximately 60%, according to FactSet.
AMC Networks has had no new news recently, other than the intention to issue $ 1 billion bonds to replace the more expensive debt with a cheaper debt.
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