AMC Shares Jump as New Meme-Stock Favorite Returns to Form

(Bloomberg) -- MC Entertainment Holdings Inc. resumed gains on Monday, halting two straight days of declines for the money-losing movie theater chain that’s become the new favorite of meme-stock investors.

The stock jumped as much as 25% before paring those gains to trade at $54.45 as of 11:11 a.m. in New York. Shares more than doubled on the first two days of a holiday-shortened last week, but gave back some of those gains after insiders cashed in with a flurry of share sales.

In an statement Monday, the U.S. Securities and Exchange Commission said it’s monitoring markets for manipulation and other forms of misconduct amid the frenzied surge in so-called meme stocks. “We will act to protect retail investors if violations of federal securities laws are found,” the agency said.

Read more: SEC Says It’s Scrutinizing Market Swings as Meme Stocks Surge

On the brink of bankruptcy only a few months ago, AMC is now the darling of retail traders, with this year’s more than 2,200% gain ranking as the most of any stock in the Russell 3000 Index. The stock’s surge has enabled the company to sell equity and shore up its shaky balance sheet. AMC is building a “strategic war chest,” B Riley analyst Eric Wold wrote in a note.

“In addition to our continued expectation that AMC could improve its balance sheet and future cash flows through debt repurchases/pay-downs, we could now see either acquisitions of smaller exhibitor chains or the takeover of leases from troubled chains,” he said.

A forthcoming reshuffle of the Russell Indexes could pose a problem for the likes of AMC and GameStop Corp., which started the meme stock craze back in January. Their enlarged market caps of $24.6 billion and $18.4 billion on Friday, respectively, put them in line for a move from the Russell 2000 small-cap stock index to the Russell 1000 index of the biggest American companies.

How to Tell Whether AMC and GameStop Will Make the Russell 1000

“The graduation of these high-fliers could be the beginning of the end of their epic run,” Wells Fargo analysts Christopher Harvey, Gary Liebowitz and Anna Han wrote in a note Friday.

©2021 Bloomberg L.P.