Share Dilution

What dilution? AMC cannot stop raising capital by selling more of its own stock, and the market cannot stop buying.


AMC Entertainment diluted its own shares again on Tuesday, and retail investors still can’t get enough.

The meme share climbed nearly 22% at Tuesday’s opening after the theater chain announced it had sold 8.5 million shares of its common stock for $ 230.5 million to Mudrick. Capital Management LP as part of its ongoing plan to capitalize on the company’s extreme popularity online with retail investors. continues to fan the flames of a stock that climbed 116.2% last week.

Tuesday’s deal is the third fundraiser for AMC AMC,
+ 19.23%
was successful in the first half of 2021, following its $ 917 million equity and debt deal in January and the completion of its $ 428 million capital increase in the market on May 14.

Announcing the deal with Mudrick Capital, AMC said in a statement that it plans to use the most recent new capital in “the pursuit of value-creating acquisitions of theater assets and leases, as well as ‘investments to improve the attractiveness of its theaters for consumers. As it did with the other two, AMC said it would also seek out debt reduction opportunities.

Mudrick Capital’s deal pegged AMC’s stock at $ 27.12 per share, or 3.8% above Friday’s closing price of $ 26.12. AMC opened at $ 31.85 a share on Tuesday, its highest valuation in more than four years, appearing to avoid any concerns the company was diluting stocks at the top of the market.

AMC CEO Adam Aron took to Twitter early Tuesday morning, putting his own social media version of the deal ahead of the market opening.

“Let me talk about smart equity raising,” Aron tweeted at 7:01 am EST. “I think one of the best things $ AMC did in 2021 was raise $ 428 million a few weeks ago, to $ 9.94 a share. Rather than the dilution severely affecting AMC in the short term, as some feared, we have strongly strengthened AMC. “

Aron went on to tweet that despite market fears for the future of theaters, AMC is looking to expand and will use at least a portion of the $ 230.5 million to fund movie theater chain rentals that are no did not survive the pandemic.

Aron even went so far as to name some targets.

“First in our sights are the most powerful Arclight / Pacific theaters that won’t reopen due to pandemic pressures,” Aron tweeted, referring to the trendy Los Angeles area theater chain. “No one is out of the woods yet, but we like AMC’s improved cash flow, the increase in the number of people vaccinated and the upcoming release of new blockbuster films.”

On Reddit, where retail traders have been singing AMC’s praises for months, users applauded Aron’s thought even as they took on the idea that a meme stock was gaining from a deal with a fund. speculative, widely regarded as the existential enemy of the retail investor after the short January squeeze.

“If an operator thinks this stock is cheap at $ 27, what do you think?” posted moodiebetts on the Reddit r / AMCstock board.

“It was sold to a hedge fund. So what does this mean for the monkeys? Ok_TXAGGIE12 asked.

“Hedge funds aren’t just about short stocks,” another user replied, flat-rate.

And there has even been a targeted differentiation of hedge funds by market-oriented users who refer to themselves as “monkeys.”

“Jason Mudrick has been GME and AMC for a long time in January,” Crooked Lemur wrote, referring to the founder and CEO of Mudrick Capital. “He’s a monkey.

Still, many AMC bulletin boards were filled with users wondering why Aron, referred to as “AA,” would execute another capital raise and risk diluting the share price by trusting a hedge fund with a large slice of money. ‘actions.

But Aron’s most vocal defender was himself.

“In our opinion, this is not a stupid dilution, but rather a very smart fundraiser so that we can grow this business,” Aron tweeted. “To many of you on Twitter, to grow YOUR business. Watch out for opponents, $ AMC will play offensive again. We arrive!”



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