AMC to the Moon
What in the world is going on with AMC Entertainment’s stock? The movie theater chain lost $4.6 billion last year as theaters closed amid the pandemic. But despite their financial woes, the company has surprisingly seen their stock skyrocket over 200% in the past week, reaching an all-time high on Wednesday. Hedge Funds be warned—it looks like “meme stocks” and the Reddit retail-trading army are back with a vengeance.
AMC’s latest surge mirrors the meme-stock frenzy at the beginning of the year when retail traders from the infamous subreddit “WallStreetBets” made household names out of distressed businesses like GameStop and made words like “stonks,” “diamond hands,” and “to the moon” enter the financial dictionary.
AMC was on the verge of bankruptcy just a few months ago, as the pandemic forced the closure of movie theaters around the country. In April of last year, its market capitalization was only about $217 million. On Wednesday, AMC’s market cap briefly passed $33 billion, leaving many investors dumbfounded. Some Wall Street pros predicted the retail-trading army would gradually abandon the market as the pandemic faded and workplaces reopened—but they couldn’t have been more wrong.
Investors are confused because they expect stocks to move in conjunction with a company’s fundamentals. But retail traders on WallStreetBets don’t care about a company’s balance sheets or cash flow statements—they just want to see the stock go to the moon. What company will the retail-trading army come for next?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.