AMC Entertainment’s shares rose again on Thursday as speculative trading activity in the cinema chain’s stock skyrocketed among Reddit-owned day traders.
The stock rose as much as 47% on Thursday, ending the session 35.6% higher at $ 26.52, bringing the week-to-date increase to nearly 120%.
AMC has overtaken GameStop and is the most popular stock on the infamous WallStreetBets Reddit forum according to Bank of America’s analysis of share mentions on the platform.
With its massive rally on Thursday, AMC turned its back on its meme stock peer GameStop, which made history on Wall Street in January with a 400% short squeeze in a week. GameStop’s shares rose 4.8% on Thursday after rising 15% in the previous session.
One of the trending posts on the WallStreetBets chat room on Thursday said, “AMC missile ship,” while another said, “I’ve invested all of my savings in AMC !!! Wish me luck folks.”
So-called short coverage could add to AMC’s massive rally this week. According to S3 Partners, the company has shorted around 20% of its float stocks, compared to an average of 5% short stocks in a typical US stock.
“AMC short sellers have recently covered some of their exposure, reversing their short selling trend earlier in the month,” said Ihor Dusaniwsky of S3 Partners.
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.
Short sellers betting against AMC have suffered a loss of $ 1.3 billion this week alone, according to the data.
Wall Street analysts are stunned by AMC stock’s surge of more than 1,200% since January. The company, with roughly $ 5 billion in debt and $ 450 million in deferred lease repayment, saw its revenue decline sharply due to the ongoing coronavirus pandemic.
As the cinema business recovers, AMC is still facing tough headwinds. Although the company ended the first quarter with $ 1 billion in liquidity, the highest in its 100-year history, AMC’s cash on hand will only stay afloat until 2022. The cinema chain will also need audiences to flock back to theaters to make up for months of no income.
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.
In the first quarter, AMC had revenues of $ 148.3 million, a decrease of 84.2% from the same period last year. Net loss decreased from a loss of $ 2.18 billion, or $ 20.88 per share, to $ 567.2 million, or $ 1.42 per share, for the quarter.
Although AMC had significantly lower sales in 2021, AMC’s valuation has nearly tripled thanks to these new retail investors. On the last day of 2019, AMC had an enterprise value of $ 5.8 billion, on Wednesday that value was around $ 13.4 billion.
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