AP – Got your popcorn? The wild ride for the summer’s blockbuster stock, AMC Entertainment, got even crazier on Thursday.
The movie-theatre company’s stock plunged nearly 40 per cent in the morning after it announced plans to sell 11.6 million shares to raise cash, while warning buyers they could lose all their investment.
But it erased the loss in just a few hours. After the stock sale was complete, it climbed above the record closing price it had set a day earlier, only to sink back to a 17.9-per-cent loss by the end of trading.
It’s the latest stupefying, nearly unexplainable set of moves for one of the “meme stocks” that have rocked Wall Street this year.
Many professional investors said AMC, GameStop and other meme stocks have hit heights untethered to reality and are primed for a steep fall, but that’s not stopping an army of smaller-pocketed and novice investors from holding their ground and promising to take their prices “to the moon”.
For AMC, that has vaulted its stock price from below USD2 early this year to the USD50.85 average price that it sold shares for on Thursday. The surge means its total market value climbed above USD30 billion, putting it on par with bigger companies like AutoZone and Old Dominion Freight Line, which unlike AMC are making profits and didn’t have speculation of bankruptcy swirling around them after the pandemic shuttered theatres last year.
In a filing with regulators, AMC couldn’t give a reason for the rise in its stock price that’s tied to its profit prospects, the usual reason for a stock price to move.
The immediate reaction in the market was sour. AMC shares fell as soon as the market opened, and the plunge was so sharp that trading was temporarily halted three times during the morning. A day earlier, its trading had been halted four times when the stock was heading in the opposite direction and nearly doubled.
Everyone agreed that a new generation of investors was seizing more power in the market, with their ranks growing because of easy-to-use trading apps and zero trading fees. But one big reason for the incoming wave of novices was that the pandemic had left them with little else to do.
When the pandemic eased, the thinking on Wall Street went, those traders would go back to eating out at restaurants and maybe even seeing movies at the theater instead of talking up and bidding up meme stocks. It didn’t play out that way, at least not yet.