AMC Entertainment launched its second share issue in three days on Thursday (June 3), while warning investors that after a week of stellar gains they risked losing their shirts if they backed the company at current prices.
AMC’s stock, initially up more than 14%, fell back to stand roughly flat after the company announced it had agreed to sell up to 11.55 million of its shares from time to time at its discretion in an at-the-market offering program.
AMC’s share price nearly doubled on Wednesday (June 2), a day after it issued 8.5 million shares to Mudrick Capital, which the hedge fund flipped at a profit.
A number of Wall Street analysts have said the cinema operator is already heavily overvalued and many institutional traders have said they were steering clear of the stock, the latest center of attention for a pack of small-time traders organized on Reddit and other social media platforms.
“Our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last,” AMC in a statement.
Echoing a warning from regulators earlier this year, it added: “Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.”
The company said in January it had secured almost $1 billion in new funding and cash from issues since mid-December, and it has continued with further issues since, even as analysts worried that it was massively overvalued.
Its shares in the company, however, have continued to gain as they were hyped online.
The pack continues to call for small investors to buy shares and call options on certain “meme stocks,” caring little about the companies’ fundamentals and particularly targeting stocks with high short interest to force bearish investors to unwind their bets at a loss.
Of other big recent “meme” plays, BlackBerry’s U.S. listing was up 19% before the bell, while GameStop dipped 5% and Koss shed 17%.
A short squeeze in GameStop in January triggered regulatory concern about the stability of brokers, with the National Securities Clearing Corp (NSCC) later applying to tighten rules on the deposits brokers are needed to post ahead of stock options expiry.
(Production: Aleksandra Michalska)