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AMC seizes on rally to sell stock, but misses even bigger payday

AMC seizes on rally to sell stock, but misses even bigger payday

People walk past an AMC theatre amid the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York on Jan 27, 2021. (Photo: REUTERS/Carlo Allegri)

NEW YORK: AMC Entertainment Holdings said on Wednesday (Jan 27) it had raised US$304.8 million by selling shares during an unprecedented social media-driven rally in its stock, though the US movie theatre firm could have raised about four times more by waiting one more day.

AMC was forced to raise capital to stay afloat after its ticket sales plunged 80% in the wake of the coronavirus outbreak. It staved off bankruptcy last year thanks to a debt restructuring deal with its lenders and private equity firm Silver Lake.

Shares of Leawood, Kansas-based AMC rose a cumulative 41 per cent on Monday and Tuesday, as amateur investors, many of them organised online in forums such as Reddit's WallStreetBest, decided to take on hedge funds shorting the stock.

AMC disclosed on Wednesday that it had sold US$304.8 million worth of stock on Monday and Tuesday, at an average price of US$4.81 per share.

The company's shares, however, jumped as much as 310 per cent on Wednesday as the speculative frenzy intensified. They closed at US$19.90 a share, about 301 per cent higher on the day. Had AMC sold the same number of shares at that price, it would have raised US$1.26 billion.

Although AMC could decide to sell more stock in the coming days, the money it left on the table shows how the speculative rally of the last few days in heavily shorted shares, particularly those of video retailer GameStop, presents both an opportunity and a challenge for companies.

An AMC spokesman did not respond to a request for comment.

AMC, which also operates Britain's Odeon cinemas, said on Monday it had already raised enough money to rule out a potential bankruptcy. Through a combination of debt and equity issuance, it has raised US$917 million since the middle of December to help cushion the blow from the pandemic.

Source: Reuters

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