AMC Entertainment Holdings Inc. (NYSE:AMC) CEO Adam Aron said that the movie theatre chain is once again “under attack” from short sellers after having avoided bankruptcy last year, Bloomberg reported Thursday.
What Happened: In an interview with social-media finance commentator Trey Collins, Aron said that the volume of short sales — bets made by traders that AMC Entertainment’s stock will fall — jumped about 50% to 73.8 million shares in March. Collins offers online investment commentary under the username Trey’s Trades.
AMC has said it is seeking shareholder approval to sell 500 million shares. However, Aron reportedly pledged that if shareholders approve the authorization for 500 million new shares to be issued, AMC will not use even one of those shares in the calendar year 2021. Instead, the company will seek to sell those shares in the coming years.
The CEO added that if AMC needed to raise cash in the short term, it already has a prior authorization to sell 43 million shares that will be sufficient to get the company through the crisis, the report noted.
Aron also praised the meme investors who bid the stock up to more than $20 a share in January this year and fought against “conventional” market participants such as short sellers, according to the report.
Why It Matters: Shares of heavily shorted stocks such as AMC Entertainment and GameStop Corp. (NYSE:GME) have been popular among retail investors. The stocks have seen extreme volatility this year as retail traders belonging to the Reddit Investor forum r/WallStreetBets bid up the stocks to create a short squeeze. AMC Entertainment’s stock has returned year-to-date gains of 366.9%.
AMC struggled last year as the closure of theatres forced the company into a cash crunch. The company, which reopened 98% of its locations in March, now expects the release of blockbuster movie titles in the coming months to boost sales this year.
It was reported in March that AMC is likely getting discounts on film-rental fees from AT&T Inc.’s (NYSE:T) subsidiary WarnerMedia. A discount on film-rental fees, which usually account for a huge share of a theatre chain’s costs, could boost AMC’s gross margins.
Price Action: AMC Entertainment shares closed almost 5.9% higher on Thursday at $9.90.
Photo courtesy: Camknows via Flickr