The Echo-nomist

AMC is an American movie theatre chain. But for right now it’s going to have to focus on making popcorn- lots of it.

AMC stocks are going through the roof and have reached an all time high. They started the new year at $2 per share and it almost reached $70 on 3rd June. What? How? Why? Nothing much, they just embraced the trolls.

It’s now a meme stock, like GameStop. Remember when Reddit started a chain of buyers for GameStop’s shares, last year? That pushed up GameStop’s share price by more than 1000%.

Something pretty similar happened with AMC.

The pandemic was a hard time for the company. Since it is a theatre company, their revenue depends on the number of people visiting their theatres. But due to COVID-19 guidelines they had to close all their theatres in the beginning of 2020. In June’20 AMC stated that it had substantial doubt that they would remain in business. They started opening their theatres slowly, per CDC guidelines. Sales didn’t pick up and in October they announced that their cash reserves would be largely depleted by early 2021.

They had borrowed a lot of money but they were able to pay back a debt of $600 million at the start of 2021 in the form of shares. The credit for this goes to Redditors. Their rallying sent the stock prices up, which gave the debtors a reason to accept shares as a method of repayment. Technically, Reddit saved the company!

Their stock has been very active since the beginning of 2021. The rise in share price is mainly because of retail and Reddit investors. After a bad year for AMC (blame the pandemic!) many investors shorted the stock. To fight the hedge funds who had massively shorted them, Redditors made it their agenda to fight them. While doing so, they fueled the rally in AMC stock.

Remember, their share prices have got nothing to do with how their business is doing! It’s still suffering from the pandemic and rise of OTT.

AMC doubled in value last week. It rose 23% on Tuesday and exploded by an additional 95% on Wednesday, leaving it more than 500% higher than last month. AMC closed at $30 billion, putting it in a close competition with other big companies listed on the stock exchange.

It was an opportunity to make good money and they didn’t let it slip. They embraced it and capitalized it.

On 2nd June, they sold 8.5 million shares for around $230 million to an investment firm called Mudrick Capital. They received great returns in just two days!

According to the company, more than 3.2 million individual investors own about 80% of the company’s shares. This means that retail investors hold most of the shares and they practically saved the company from bankruptcy.

Which is why they thought it would be appropriate to reward them with something. Aaron, the CEO of AMC, said “we intend to communicate often with these investors, and from time to time provide them with special benefits at our theaters.”

What kind of special benefits? Free large popcorns for the investors watching movies in an AMC theatre this summer, invitations to movie screenings and lots of other surprises yet to be unveiled…

🤨

Is there some ulterior motive in play here? Maybe.

This will ensure that the investors hold on to the stock for a long time and that this hike doesn’t immediately collapse. The popcorn incentivized them to hold on to AMC shares for the summer at least.

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Restrictions are reducing in the US and who wouldn’t like a free (large) popcorn during a movie? But to get the popcorn they have to watch a movie at AMC’s theatre. This will increase their ticket sales and revenue. Special screenings, discounted items and more benefits will keep the retail investors engaged and make sure that they don’t sell it away.

Like Aaron said, “these people are the owners of AMC, and I work for them.” Till audiences return to theatres, the company’s success depends more on retail investors and keeping them happy.