Shares of AMC Entertainment Holdings surged more than 40% to a fresh record high on Wednesday (June 1), extending a breathtaking rally that has seen its stock price more than triple since mid-May.
The theater chain operator’s shares were recently up 47% at $47.25, a fresh record. Its market value has ballooned to more than $19 billion, eclipsing that of video game retailer GameStop, another favorite of retail investors on forums such as Reddit’s WallStreetBets, whose market value recently stood at just over $18 billion.
The gains came a day after hedge fund Mudrick Capital sold a $230 million stake in the company for a profit shortly after acquiring it, saying it believed the stock was overvalued, according to a source.
The AMC rally is likely partly driven by market markers buying stock to hedge their exposure from selling options, an event known as a “gamma squeeze,” analysts said.
Call options that would pay off if the shares topped $40 by June 18 accounted for the largest block of open contracts on AMC, with about 215,000 contracts open.
Market makers who sold these and other bullish contracts were left with no choice but to buy AMC stock to hedge their own risk, thereby exaggerating the rally, analysts said.
(Production: Aleksandra Michalska)