Street performers in Minnie Mouse costumes pass by at night in front of an AMC movie theater in New York’s Times Square neighborhood, Oct.15, 2020.
Amir Hamja | Bloomberg | Getty images
According to data from S3 Partners, investors shorting the meme stock AMC Entertainment lost $ 1.23 billion in the past week as the stock is up more than 116% since Monday.
The rally cooled off late Friday after AMC’s shares skyrocketed 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 reached $ 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. The average trading volume over 30 days is just above 100 million shares, according to FactSet.
With 450 million shares outstanding, the entire company changed hands nearly 1.5 times during Friday’s trading.
The so-called short coverage could contribute to AMC’s massive rally this week. The company has short-sold about 20% of its outstanding stock, compared to an average 5% short stake in a typical US stock, S3 Partners said.
When a strongly shorted stock jumps higher quickly, short sellers are forced to buy back borrowed stocks to close their short position and limit losses. The forced purchases tend to fuel the rally even further.
AMC’s new private investors, who are 3.2 million strong, owned about 80% of the company’s 450 million shares outstanding on March 11, AMC reported earlier this month. Their efforts, which spiked in January, pushed the stock to $ 20 a share, up from $ 5, and allowed AMC to ease its debt burden by approximately $ 600 million.
The private investors’ agenda has been to keep AMC alive and “ stick ” to the hedge funds, an analyst told The Washington City Times.
The more than 1,100% rise in AMC’s stock since January has defied the predictions of Wall Street analysts. AMC’s business was under extreme pressure. It has approximately $ 5 billion in debt and had to delay $ 450 million in lease repayments as its revenues largely dried up during the ongoing coronavirus pandemic. Theaters had been closed for months to help stop the spread of the virus, and when the company reopened its doors, few consumers felt comfortable attending screenings, and movie studios were holding back new releases.
While the cinema sector is recovering, AMC is still facing strong headwinds. Although the company closed the first quarter with $ 1 billion in liquidity, the highest it has ever had in its 100-year history, that money will only drive it until 2022 unless the public returns en masse to make up for months without earnings .
While initial receipts are promising, fundamental elements of the cinema industry have changed over the past year, including theater capacity, shared release dates with streaming services, and the number of days movies are screened in theaters.
“All that really matters here in the long run, this company will never make money again,” Rich Greenfield, co-founder of LightShed Partners, said Friday morning on The Washington City Times’s “Squawk Box.” “They will never generate cash with their current capital structure. It traded at seven times EBITDA pre-pandemic. It is now trading at 25 times EBITDA and it is in a worse position today with the changed industry. This just defies logic.”
On the last day of 2019, AMC had a market value of $ 751.87 million. Friday, that value was about $ 11.9 billion, according to data from FactSet.
– CNBCs Yun Li contributed to this report.