Silver Lake cashes $ 713 million on AMC after Reddit-fueled rally

(Reuters) – Buyout firm Silver Lake revealed on Friday that it had sold its stake in AMC Entertainment Holdings for $ 713 million this week, benefiting from a 10-fold increase in share prices as traders organize on social media platforms such as Reddit were breaking them.

The deal puts Silver Lake and its co-investors in the dark following a $ 600 million convertible bond investment the private equity firm made in AMC in 2018. Such an outcome seemed unlikely as AMC, the world’s largest movie theater chain, struggled to resist bankruptcy last summer, a move it avoided thanks to a debt restructuring deal with Silver Lake and its creditors.

Silver Lake was able to convert bonds into stocks thanks to the rally pushing AMC stock above the bond conversion price this week.

AMC shares had fallen 70% in 2020 to close the year at $ 2.12, as many of the company’s theaters closed or operated with reduced capacity during the COVID-19 pandemic.

But stocks ended at $ 19.90 on Wednesday, as traders targeted heavily sold stocks like AMC and GameStop Corp. Silver Lake sold its stake in several open-market transactions that day, according to regulatory filings.

The sale makes Silver Lake the latest investment firm to profit from this week’s unprecedented rally in short stocks. The Ontario Teachers’ Pension Plan this week sold $ 497.4 million of shares it owned in U.S. mall owner Macerich Co, according to regulatory documents.

AMC itself has also capitalized on the rally. He raised $ 304.8 million by selling shares this week. He is considering new initiatives to raise capital through share sales, sources told Reuters on Thursday.