#AMC shares soar on ‘meme stock’ rally, price doubles in a week

Shares of AMC Entertainment capped a wild week of trading with a roller-coaster Friday that saw the shares surge as much as 38 percent in early trades before settling to end the day off 2 percent.

Despite Friday’s thud, the stock finished the week up more than 100 percent, giving the company an unprecedented market capitalization of nearly $12 billion. That’s up from less than half a billion dollars last year. Shares are up more than 1,200 percent since January. 

GameStop, which led the market rally in January that seemingly pitted a massive community of traders on Reddit against hedge funds that were betting against the stock, lost 13 percent on Friday after rallying 15 percent earlier in the week.

With this week’s rally, AMC may have unseated GameStop as the favorite among Reddit traders. 

In the WallStreetBets Reddit forum, users shared countless posts cheering the movie theater chain. “Invested all my savings into AMC!!! Wish me luck guys,” one trending post read, while others shared images of their holdings. 

Retail investors on Twitter also rooted for the stock, with #AMCSTRONG, #AMC500k and #OccupyWallstreetAMC all trending on Thursday.

AMC is a heavily shorted stock, meaning that many investors are betting shares of the company will drop in value. Almost 20 percent of AMC shares are currently sold short, compared with an average of 5 percent short interest in a typical US stock, according to data from Ortex Analytics.

When a heavily shorted stock spikes in value, short sellers are forced to buy back borrowed shares at a loss to close their position and stymie losses. That forced buying can further fuel the rally in what’s referred to as a “short squeeze.” 

Short sellers betting against AMC have lost about $1.75 billion just this week, according to the data from Ortex.

As Reddit traders fuel the rally, Wall Street analysts focused on the underlying value of AMC’s assets are likely looking on in confusion. 

While the moviegoing business is picking up as Americans emerge from the pandemic, AMC suffered substantial losses over the past year. The company has some $5.4 billion in debt, it announced in its first-quarter earnings report, and has $1 billion in liquidity. 

The rally in the company’s stock price has helped it raise fresh cash to fund ongoing operations. But the company has yet to make a profit on a quarter since the pandemic struck.

For the first quarter of 2021, AMC posted a net loss of $567.2 million compared with a loss of $2.18 billion a year earlier as the pandemic took hold.