AMC embraces meme stock status, share price nearly doubles

Business

FILE – In this March 5, 2021 file photo, people line up for movie tickets at a reopened AMC theater in New York. AMC said Wednesday, June 2, that it’s launching AMC Investor Connect, an initiative that will put the company in direct communication with its individual shareholders to keep them up to date about important company information and provide them with special offers. (Photo by Evan Agostini/Invision/AP, File)

After its movie theaters were shut and its stock nearly left for dead because of the pandemic, AMC Entertainment is embracing the horde of fanatical investors who shocked its shares back to life as part of this year’s “meme stock” buying spree.

The company said Wednesday it’s launching a program called AMC Investor Connect to stay in direct contact with those 3.2 million investors. Many bought AMC stock early this year, even as professional investors ran away, and helped lift it from less than $2 on Jan. 5 to as high as $72 on Wednesday.

AMC called them an “extraordinary base of enthusiastic and passionate individual shareholders,” but they’re more likely to call themselves supporters who are taking the stock price “to the moon” and shaking up Wall Street along the way.

“After all, these people are the owners of AMC, and I work for them,” AMC CEO Adam Aron said in a statement.

These smaller-fry buyers are known in the industry as “retail investors,” to separate them from the pension funds, mutual funds and other institutional investors that typically dominate a company’s ownership. At AMC, retail investors made up more than 80%, as of mid-March.

Retail investors have become a much more powerful force across the market in recent years. Easy-to-use trading apps and zero trading commissions have drawn in a new generation of traders. So did the pandemic, which meant millions of people were suddenly sitting on their couches with little else to do.

Social media has amplified their power further, with threads on Reddit, Twitter and elsewhere quickly building momentum for some stocks. It was most apparent early this year when AMC, GameStop and a handful of other beaten-down stocks suddenly surged to shock and awe Wall Street.

Leawood, Kansas-based AMC soared 525.5% in January alone, after plunging nearly 71% the prior year. GameStop had an even more breathtaking move, vaulting 1,625%. In some cases, the quick gains short-circuited heavy bets made by hedge funds that the stocks would fall, which ultimately escalated the upward move.

Besides sharp swings, the increased weight of retail investors has also heightened critics’ warnings that prices for investments across markets have inflated into dangerous bubbles, such as in the volatile world of cryptocurrencies.

Bitcoin climbed above $60,000 early this year, only to fall back toward $38,000, according to Coindesk. Dogecoin, which is trying to shed its image as a joke cryptocurrency, has soared more than 8,000% in 2021.

At AMC, much of professional Wall Street says the stock has also climbed too high. Some analysts peg its value closer to $5 than its closing price of $62.55 on Wednesday.

Instead of focusing on such analysts, though, AMC Investors Connect, will send communications from its CEO directly to retail investors. It will also offer special screenings, discounts and other promotions to shareholders. The first offer is for a free large popcorn while visiting a theater this summer.

The market’s initial reaction to the new initiative was akin to a summer blockbuster. AMC’s shares nearly doubled on Wednesday to set a record closing high for the first time in six years, and trading in its stock was temporarily halted four times through the afternoon because of the sharp volatility.

Other meme stocks were also big movers on Wednesday, with GameStop rising 13.3%, in sharp contrast to the rest of the listless stock market. The S&P 500 inched up by 0.1%.

AMC’s announcement came a day after it said that it was raising$230.5 million through a sale of 8.5 million shares of stock, cashing in on the frenzy that has sent its stock price up 2,850% this year.

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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