Today’s AMC Filing: Don’t Buy Our Stock

The year 2021 has been the year of the Meme Stock. A huge wellspring of interest in amateur retail investing was spurred on by the short squeeze of GameStop’s stock in January. Since then, amateur investors have flocked to social media sites like Reddit to follow the newest trends around which “meme stock” they’ll invest in next.

The upswing in interest has coincided with an unusual market climate that has allowed for some really strange things to happen with retailers’ stock prices. GameStop was hardly the only stock that benefitted from the attention of social media-savvy amateurs looking for a way to make some money.

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Another company notable for its 2021 rallies is AMC, the movie theater chain that short-sellers predicted would be shuttered by this summer. On Thursday, AMC released a filing that is unlike anything financial analysts have ever seen.

AMC’s Place in the Market

AMC’s stock price was near rock-bottom at the end of 2020, with lengthy lockdowns keeping theaters’ doors closed. This was a disaster for the company’s bottom line, so investors were betting that the company would be going under in no time.

Aggressive short selling combined with the surge of interest in retail investing in January 2021 led to a market that was ripe for a short squeeze. AMC stock opened at $60 per share on Thursday, thanks in large part to the disruptive influence of “meme stock” retail investors.

AMC Warns Investors Not to Buy Their Stock

A filing the company issued Thursday doesn’t is unlike anything financial analysts have ever seen. “We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last,” the company explains in the filing.

 “Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.”

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Suffice it to say, it’s not common for a company to tell shareholders to avoid buying their stock. But the advice is sound: it’s not a good idea to buy stocks that are on the high end of a volatile upswing in value. Movie theaters are doing better in summer 2021 than they were in winter 2020, but that doesn’t mean that this is the price where AMC’s stock is most likely to settle.

Other Meme Stocks

AMC and GameStop are just the biggest names among “meme stocks” that have had their share prices rocket up in response to a short-selling market. Other companies who had previously been written off as likely victims of 2020–like Bed, Bath, and Beyond; BlackBerry; and Express–have also benefitted from similar stock surges.

However, some analysts believe that AMC is the only company really cashing in on this opportunity. GameStop, BlackBerry, and others have largely treated this surge as “a moment in time” instead of a golden opportunity. During GameStop’s stock surge, some felt as though the company’s board of directors was just riding the wave, unsure what to do with the situation. Now, the company is in a leaderless flux, with board member Ryan Cohen poised to take over following the next investor meeting.

Capitalizing on the Moment

On Wednesday, Mark Tritton, the CEO of Bed, Bath, and Beyond told Yahoo Finance something extremely surprising. When asked about his company’s stock rally that day, he bluntly answered “Today’s activity is just a day in time.”

You don’t need to be an executive in charge of a company to know that this is the wrong way to be thinking about an opportunity like this. Sure, the situation is volatile. Any reasonable analyst will tell you that these stock prices are certain to fall in the next few weeks or months. However, a company’s stock price is its lifeline. How much easier is it to raise money when you’re trading at $60 per share?

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That’s the question AMC has asked itself. On Wednesday, the company raised an eye-watering $230 million from Mudrick Capital, a sum that will help them recover and expand their business by acquiring independent theaters that shuttered during 2020.

“Given our scale, experience and commitment to innovation and excellence, AMC is being presented with highly attractive theatre acquisition opportunities,” the company said in the announcement of Mudrick’s investment.

Who’s Next?

BlackBerry, GameStop, and Bed, Bath, and Beyond need to realize that AMC’s strategy is the winning one. In the fast-paced world of modern retail, no one is rewarded for waiting. Bold moves, grabbing opportunities as they present themselves, and investing in your future success with today’s fortune is par the course. Just ask the retail investors who made their fortunes by betting big on meme stocks.

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