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What happened
Actions of the besieged theater operator AMC Entertainment Holdings (NYSE: AMC) jumped another 85% at the open market on Friday and had recovered to a 58% gain by 9:55 a.m. EST.
The rally of Reddit users continues after Robinhood opened trading on several highly volatile names involved in the ongoing short squeeze phenomenon.
So what
AMC tried to take advantage of the stock price momentum earlier this week by raising more than $ 300 million by selling shares at a price of $ 4.81. It may have seemed like a good move at the time, as the stock had more than doubled from two weeks earlier.
But the irrational moves by names linked to Reddit helped push the shares to nearly $ 20 a share on Wednesday after AMC’s capital increase. Now, Reuters reports that AMC is discussing another capital increase as the stock is trading at nearly $ 13 per share.
Image source: Getty Images.
Now what
As late as Monday, the theater operator told investors it had raised $ 917 million in debt and equity since mid-December 2020, as the company continues to fight theatrical closures, limited capacities and movie release delays. AMC President and CEO Adam Aron said in a statement Monday: “This means that any discussion of an impending bankruptcy for AMC is completely irrelevant.”
But the stock has tripled this week amid the short squeeze action. It would make sense for him to raise all possible capital in this environment. Traders attempting to enter the action should be very careful because the theory of greater madness is playing out. If AMC sets the price for another stock offering, it will show that even the company doesn’t believe the current inflated valuation is real and lasting.
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