Street performers in Minnie Mouse costumes walk past an AMC movie theater in New York’s Times Square at night on October 15, 2020.
Amir Hamja | Bloomberg | Getty Images
Investors shorting Meme stock AMC Entertainment According to data from S3 Partners, shares have lost an estimated $ 1.23 billion over the past week, as stocks are up more than 116% since Monday.
The rally cooled off late Friday after AMC stock surged up to 38% during early morning trading. The stock 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 trading volume after 30 days 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 shorted about 20% of its outstanding shares, compared to an average of 5% short on a typical US stock, S3 Partners said.
When a sharply shortened stock bounces up quickly, short sellers are forced to buy back borrowed stocks to close their short position and reduce losses. The forced buy tends to drive the rally even further.
AMC’s new private investors standing by 3.2 million strongAMC owned approximately 80% of the company’s 450 million shares outstanding as of March 11, earlier this month. Their efforts, which soared in January, raised the stock from $ 5 to $ 20 per share and allowed it AMC is expected to reduce its debt burden by around $ 600 million.
The retail investor agenda was to keep AMC alive and hold onto the hedge funds, an analyst told CNBC.
AMC’s stock has risen more than 1,100% since January has defied the predictions of Wall Street analysts. AMC’s business was extremely strained. The company has approximately $ 5 billion in debt and has had to postpone repayments on lease contracts of $ 450 million as its ongoing operations largely dried up Coronavirus pandemic. The cinemas were closed for several months to stop the virus from spreading. When the company reopened its doors, few consumers were comfortable attending film screenings and film studios withheld new releases.
While The cinema business is recoveringAMC is still facing strong headwinds. Although the company ended the first quarter with $ 1 billion in liquidity, the highest in its 100-year history, that money will only keep it afloat until 2022 unless audiences come back in droves for months without offsetting revenue.
While early box office revenues are promising, fundamental elements of the cinema business have changed over the past year, including theater capacity, joint release dates with streaming services, and the number of days that movies are shown in theaters.
“Anything that matters long-term here will never make money again for this company,” said Rich Greenfield, co-founder of LightShed Partners, on Friday morning at CNBC.Squawk box. “” They will never generate cash with their current capital structure. It was trading at 7 times pre-pandemic EBITDA. It is currently trading at 25 times EBITDA and is in a worse position today with the changed industry. This just goes against 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.