AMC milks rally with second share issue this week, stock falls
(Reuters) - AMC Entertainment announced its second share issue in three days on Thursday, adding to the company's efforts to bolster its finances on the back of a Reddit-driven speculative surge in its stock.
AMC's stock, initially up more than 14%, fell back to trade 2% $61.36 before the bell, after the company said it had agreed to sell up to 11.55 million of its shares in an at the market offering program.
AMC's share price had nearly doubled on Wednesday, a day after it issued 8.5 million shares to Mudrick Capital, which the hedge fund flipped at a profit.
"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," AMC in a statement.
It added: "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."
The company said in January it had secured almost $1 billion in new funding and cash from issues since mid-December, and it has continued with further issues since, even as analysts worried that it .
A number of Wall Street analysts have said the cinema operator is already heavily overvalued and many institutional traders have said they were steering clear of the stock.
David Trainer, CEO of investment research firm New Constructs said that the rise of streaming and stiff competition facing movie theaters meant the U.S. economy's reopening is unlikely to boost the AMC's performance.
"AMC's business was trending in the wrong direction even prior to the Covid-19 pandemic...We think AMC's stock is worth $0 per share, given its weak earnings, dilution from recent stock offerings and mountain of debt."
Shares in the company, however, have continued to gain as they were hyped across Reddit and other social platforms by the pack of small time investors who have driven a series of surges in stocks since last December.
Of the other "meme" stocks, BlackBerry Ltd's U.S. listing was up 11.4% before the bell, while GameStop Corp dipped 2.3% and Koss Corp shed 14%.
The pack has been organizing on social media sites to buy shares and call options on certain "meme stocks", caring little about the companies' fundamentals and particularly targeting stocks with high short interest to force bearish investors to unwind their bets at a loss.
A short squeeze in GameStop in January triggered regulatory concern about the stability of brokers, with the National Securities Clearing Corp (NSCC) later applying to tighten rules on the deposits brokers are needed to post ahead of stock options expiry.
(Reporting by Sagarika Jaisinghani, Aaron Saldanha in Bengaluru and Thyagaraju Adinarayan, Sujata Rao in London; Editing by Sriraj Kalluvila, Saumyadeb Chakrabarty and Patrick Graham)
