AMC stock surges as hedge fund buys — then sells — $230M stake

0
19

[ad_1]

Suspense, mystery, intrigue — the latest AMC drama has a plot twist not even the movie theater company saw coming.

AMC Entertainment announced Tuesday it will raise $230.5 million by selling 8.5 million shares to hedge fund Mudrick Capital, saying it plans to use the cash to “go on the offense” by pursuing opportunistic acquisitions across the virus-ravaged movie-theater sector.

But just hours later, it was reported that Mudrick Capital had sold all of its shares, saying the stock was “overvalued,” and pocketing a tidy profit in the process. The second headline didn’t tank AMC’s shares, however. They closed up 23 percent, higher than the 15-percent boost they got after the initial news.

Mudrick valued AMC stock at $27.12 a share, giving the company a valuation upwards of $13 billion — a remarkable number for a stock that had dropped to $4 six months ago as its business was on the brink of bankruptcy amid nationwide COVID-19 lockdowns.

AMC is reportedly looking to make acquisitions as movie lovers return to theaters.
AMC is reportedly looking to make acquisitions as movie lovers return to theaters.
AFP via Getty Images

“I’ve never seen anything like this,” LightShed Partners analyst Rich Greenfield told The Post. “Good news is positive for the stock; bad news is even better.” Greenfield has given AMC shares a one penny price target, predicting the company will never generate cash again.

A person close to Mudrick said the hedge fund never intended to hold the shares long-term but had not informed AMC they would sell their stake so quickly. Mudrick Capital, which specializes in distressed debt, has almost $200 million in outstanding loans to AMC and a vested interest in the movie theater exhibitor paying down doubt.  

One person close to Mudrick says, “Whether Mudrick holds the shares or sell is irrelevant — AMC raised $250 million dollars today, which will help as they pay down almost $6 billion in debt.”

The source added that investors at the hedge fund want the best for the company but are cynical the Reddit rally can be sustained. Most of Mudrick’s investors come from a different world than Redditors — “one that values business based on fundamentals,” a source adds.

AMC's shares have gotten a boost from the meme stock phenomenon.
AMC’s shares have gotten a boost from the meme stock phenomenon.
Evan Agostini/Invision/AP

While the company has struggled through the pandemic, its shares have gotten a massive boost from day traders who have organized on Reddit to push so-called meme stocks including AMC, Gamestop and BlackBerry higher. AMC stock is now up more than 1,000 percent year to date.

And even as the Reddit army has buoyed the price over the last few months, sources note that day traders aren’t as reliable as institutional investors and could decide to sell as quickly as they decided to buy into the company.

In a Tuesday securities filing, AMC admitted that its current market capitalization “reflects valuations that diverge significantly from those seen prior” and that “purchasers of our Class A common stock could incur substantial losses if there are declines … driven by a return to earlier valuations.”

AMC declined comment. Mudrick declined comment.

[ad_2]

Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here