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Shares of retail favorite AMC nearly double, company woos investors with free popcorn

Stock MarketsJun 02, 2021 06:06PM ET
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2/2 © Reuters. FILE PHOTO: Three women use the emergency exit stairs of an AMC movie theater as a makeshift gym in Smyrna, Georgia, U.S. April 27, 2020. REUTERS/Elijah Nouvelage 2/2

By Saqib Iqbal Ahmed, Sinéad Carew and Devik Jain

(Reuters) - Shares of retail investor favorite AMC Entertainment (NYSE:AMC) Holdings Inc nearly doubled in price on Wednesday, extending a breathtaking rally and reinvigorating the meme stock phenomenon that has captivated investors.

The theater chain operator's shares closed up 95.2% at $62.55, a fresh record. At the close, AMC's market value stood at $28.17 billion, more than ViacomCBS (NASDAQ:VIAC) and Kellogg (NYSE:K), as well as fellow meme-stock GameStop (NYSE:GME).

In an apparent nod to the retail investors that have hyped the stock in forums such as Reddit’s popular WallStreetBets, AMC CEO Adam Aron on Wednesday announced an initiative that offered even the smallest shareholder a free large popcorn if they signed up to a regular newsletter.

Among other so-called meme stocks - companies popular with a new generation of social media centric traders on WallStreetBets and other online forums - security software provider BlackBerry (NYSE:BB) and headphone maker Koss Corp rose 31.1% and 68.6%, respectively.

The massive rise in AMC's shares, which are up about 2,850% from just over $2 at the end of last year, is beginning to resemble the wild ride in shares of GameStop earlier this year.

"It's meme stock 2.0.,” said Steve Sosnick, Chief Strategist at Interactive Brokers (NASDAQ:IBKR).

GameStop shares rose more than 1,600% in January, buoyed in part by bearish investors unwinding their bets against the heavily shorted stock in the face of a massive buying surge.

'GAMMA SQUEEZE'

Some of the upward price move in AMC is likely being driven by market makers buying up stock to hedge their exposure from selling options, an event known as a “gamma squeeze,” analysts said.

"People have learnt what tactics work under these insane circumstances. They are using a very similar play-book," Sosnick said. Call options that would pay off if the shares topped $73 by Friday were the most heavily trade AMC options on Wednesday, with about 233,000 contracts changing hands.

With shares approaching that level, market makers who sold these and other similarly bullish contracts were left with no choice but to buy up AMC stock to hedge their own risk, thereby exacerbating the rise in the share price, analysts said.

"Market makers are just chasing the stock," said Matt Amberson, principal at options analytics firm ORATS.

Wednesday’s near doubling of the stock price will likely test investors that have shorted AMC. Bearish investors were down $5.2 billion for the year and lost nearly $2.8 billion on Wednesday alone, data from S3 showed.

"If you began your short at under $10 and you were sure the stock was overvalued at $10 it makes more sense that it’s over valued at $30 or $70,” said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners. However, "at a certain point your losses outweigh your thesis."

The surge in AMC shares comes a day after hedge fund Mudrick Capital Management LP sold a $230 million stake in the company for a profit shortly after acquiring it, saying the stock was overvalued, according to a source.

Investors appeared unfazed by the sale, which some analysts characterized as an attempt to cash in on the retail-driven surge in its stock.

"There's a retail fanaticism with this stock right now," said MKM Partners analyst Eric Handler, who has a sell rating and a $1 price target on AMC stock. "There's such a disconnect between what the stock's doing and what the fundamentals look like."

On Twitter and WallStreetBets, some users exhorted one another to hold on to their shares of AMC while others cheered on the rally.

"$amc let’s go again to $100 and beyond," wrote Twitter user @Rodolf30592158.

AMC was the most heavily traded name in options on Wednesday, with 4.6 million contracts traded. About $39 billion worth of AMC shares was traded on Wednesday, by far the most of any stock on Wall Street, per Refinitiv data.

The company has been among the biggest gainers from a deluge of interest in so-called meme stocks.

"The (retail trading) party could go on as long as investors could continue co-acting," said Ipek Ozkardeskaya, senior analyst at Swissquote. "The problem is, the higher the price goes, the higher is the temptation to take profit and walk away."

Shares of retail favorite AMC nearly double, company woos investors with free popcorn
 

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Comments (19)
Ty Rafael
Ty Rafael Jun 02, 2021 9:29PM ET
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The moment that tbe CEO of AMC said that he works for his investors is the moment that I said I'm not selling my shares. It gets tempting when I see my dollar amount but this is just getting started. We are only in the beginning of June. Theaters are going to be packed this summer. AMC has already made positive changes that I like and the CEO seems to appreciate the help from retail investors.
Jeremy Thornton
Jeremy Thornton Jun 02, 2021 9:29PM ET
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You are a ****..
Roger Pruzansky
Roger Pruzansky Jun 02, 2021 9:29PM ET
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I'm with it i will open today a postion
Ty Rafael
Ty Rafael Jun 02, 2021 9:29PM ET
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Thank you. That's a compliment coming from someone like you.
John Shiels
John Shiels Jun 02, 2021 9:29PM ET
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Hogs get slaughtered.
Dave Jones
Dave Jones Jun 02, 2021 4:47PM ET
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Wait....Free popcorn?! I'm in!!!!
Chris Vu
Chris Vu Jun 02, 2021 4:21PM ET
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I have no tears for shorts. Let them be shafted for a change.
Nazmus Saqib
Nazmus Saqib Jun 02, 2021 4:08PM ET
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Good report Saqib 👍
Nazmus Saqib
Nazmus Saqib Jun 02, 2021 4:08PM ET
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Good report Saqib 👍
Nazmus Saqib
Nazmus Saqib Jun 02, 2021 4:08PM ET
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Good report Saqib 👍
Michael Dell
Michael Dell Jun 02, 2021 4:06PM ET
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The dollar has become a joke and must crash by 2024…Printing press is in unprecedented level and cant go on much more
gary leibowitz
gary leibowitz Jun 02, 2021 3:08PM ET
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Bubble bubbles everywhere tickling ny nose.
SALIM MUSA MUHAMMAD
SALIM MUSA MUHAMMAD Jun 02, 2021 2:58PM ET
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i like it
Eric Duran
Eric Duran Jun 02, 2021 2:50PM ET
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AMC 100K
Abdul Qayyum
Abdul Qayyum Jun 02, 2021 2:45PM ET
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I need help
ja aa
ja aa Jun 02, 2021 2:42PM ET
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you misspelled 95+%.
Michael Eymer
Michael Eymer Jun 02, 2021 2:42PM ET
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FUD
ja aa
ja aa Jun 02, 2021 2:42PM ET
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Salma El
Salma El Jun 02, 2021 2:38PM ET
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byoro fo
Connecticut Yankee
A_Jaundiced_Eye Jun 02, 2021 1:41PM ET
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2021 - the Year of Free Money
Vlad Lozovskiy
Vlad Lozovskiy Jun 02, 2021 1:10PM ET
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Should we hold or sell? Any ideas guys?  And why!!!
Steffen vdm
Steffen vdm Jun 02, 2021 1:10PM ET
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If I had the answers, I would not be commenting right now. I would probably be lying in a hammock, smoking a sigar and drinking whiskey
Vlad Lozovskiy
Vlad Lozovskiy Jun 02, 2021 1:10PM ET
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Steffen vdm  That is why I'm not asking someone like you.  obviously you are a loser.
Michael P Hitchcock
Michael P Hitchcock Jun 02, 2021 7:27AM ET
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IDK about you guys I was doing it for the Hedgies but now I am doing to for the Free POPCORN. Know when you have the winning hand HOLD BABY HOLD!!!
Michael P Hitchcock
Michael P Hitchcock Jun 02, 2021 7:26AM ET
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IDK about you guys I was holding for the hedges but now I am for the Free Popcorn JS.
Pupi Pi
Pupi Pi Jun 02, 2021 7:06AM ET
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Very nice! Holders win, hedgies lose, no dump, we like the stonk!🚀🚀🚀🚀🚀
Gene Kret
Gene Kret Jun 02, 2021 6:15AM ET
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Pump and dump!!!! Discusting, its buyer be ware and you cant fix stupid.
 
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