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Shares in the movie theater giant AMC Entertainment surged Wednesday, driven by casual traders spurred on by Reddit’s “r/wallstreetbets” community, TikTok and other social platforms. “#SaveAMC” was one of Twitter’s top trending topics Wednesday morning, driven by users of those platforms.
At the market open Wednesday, AMC shares were up nearly 300 percent, trading at $20.31. AMC shares were trading at $2.01 just three weeks ago and closed Tuesday at $5 per share. Until Wednesday, AMC shares hadn’t traded above $20 since September 2018.
AMC closed at $19.90 per share Wednesday afternoon and was the most traded stock by volume of any company in the world for the day, with nearly 1.2 billion shares trading hands.
R/wallstreetbets, a subreddit where casual investors trade tips, show off winning trades and use memes to promote their stock picks, has been in the news this week for its pumping of shares in GameStop. The retailer, best known for selling video games and gaming accessories in malls, was trading at under $20 per share at the end of 2020. On Tuesday, less than a month later, it closed at $148 per share, despite there being no new or relevant change to its fundamental business.
AMC, at least, has specific reasons for optimism. This week it announced that it had secured new financing that would allow it to avoid bankruptcy and stay in business well into 2021. “Today, the sun is shining on AMC,” CEO Adam Aron said.
On r/wallstreetbets Tuesday, users pushing for a pump of AMC were spreading messages like “AMC TO THE MOON! 1k tomorrow pays 10k next week!” and “if this gets even a small % of GME [GameStop] buyers, we could see a wild run.”
One big question facing AMC, now that its stock price is surging: Will it take advantage of the (likely short-lived) boost? The company filed for an “at-the-market” stock listing at the end of 2020, allowing it to sell 50 million additional shares on the public markets. On Wednesday, the company announced that it had completed its at-the-market offering, selling just over 63 million shares for about $305 million. That works out to just under $5 per share, meaning that most shares were sold before today’s rally. However, because the sale was completed today, the company was likely able to benefit at least a little bit from the surge.
In a White House press briefing Wednesday afternoon, press secretary Jen Psaki said that the White House economic team, including Treasury Secretary Janet Yellen, are “monitoring the situation” around the unusual trading volumes. “It is a good reminder, though, that the stock market isn’t the only measure of the health of our economy,” Psaki said.
Of course, a community of casual traders operating on mobile apps can bring its own quirks. One of them: Shares of AMC Networks (the owner of the cable channels AMC, BBC America and Sundance Channel) also surged 12 percent at the open Wednesday, apparently driven by users searching for “AMC” in their trading apps, or traders betting that others would make that mistake. AMC Networks trades as “AMCX” while AMC Theatres trades as “AMC.”
The r/wallstreetbets community is also driven by a populist desire to stick it to financial firms. “That’s the sentiment, the public doing what they feel has been done to them by institutions,” Reddit co-founder Alexis Ohanian tweeted Wednesday. “This is an echo of what we’ve seen social media enable the public to challenge institutions for the last decade.”
Tesla CEO Elon Musk, who has benefitted from enthusiasm by casual traders, has also promoted r/wallstreetbets on his Twitter account, at one point tweeting “Gamestonk!!” [a reference to a popular meme about stocks] with a link to the community.
One of the ways the casual traders are taking on the hedge funds is by targeting companies popular with short-sellers, who are betting that a company’s stock will go down. AMC and GameStop have both been popular targets for shorts, who have been betting that the pandemic would batter their businesses. By pumping those stocks, the Reddit traders are pulling off what’s called a “short squeeze,” forcing those funds that are shorting the companies to buy new shares to cover their positions and minimize losses (potentially boosting the stock price even higher).
One fund that had publicly shorted GameStop, Melvin Capital, is down 30 percent for the year. On Wednesday, the fund told CNBC that it had exited its GameStop position, to large losses.
Now, the casual traders are betting that AMC Entertainment will mark their next victory.
“F*CK THE SHORTS. This stock has so much short interest it is the next GME [GameStop] to squeeze,” Reddit user PlatinumHandz wrote of AMC Tuesday.
“AMC to the moon boys!” wrote Twitter user Philo488 Wednesday, alongside some rocket emojis. “Do not sell. Let’s bankrupt another hedge fund!”
User Starduststones added to the Reddit thread: “Support out local theaters, and for sure … YOLO!”
Jan. 27, 1:30 p.m. Updated with news that AMC had completed its at-the-market offering.
Jan. 27, 4:00 p.m. Updated with AMC’s price at market close.
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