We continue to explore the underside of the AMC case – the reasons for the surge… and a publicity stunt so resounding it could open a whole new level of insanity in an already insane market.
Despite dismal fundamentals, AMC’s action has soared in recent days. By what mystery, we were wondering yesterday ?
Not being fools, AMC insiders decided to take advantage of Mr. Market’s mental incapacity. They know their stocks are overvalued. So what are they doing? They sell more!
In two separate sales, the company sold 20 million shares and raised $ 800 million. The marathon followed other offers made earlier in the year – bringing the zombie company a total of $ 1.6 billion in new blood.
It’s not like they’re trying to rip people off, though. They just follow the dance. In its offer document, AMC clearly warns players:
“Given the circumstances, we do not recommend that you invest in our Class A common stock unless you are prepared to take the risk of losing some or all of your investment. “
The story is a little more complicated (we don’t even try to follow it in details), but the company needed shareholders to authorize more shares. AMC CEO Adam Aron therefore tried to persuade them, producing this gem:
“If you give us the tool – in other words, the actions – to find opportunities that create value for AMC shareholders, we can do it. “
Find “value-creating” opportunities? Looks like AMC management is turning into PSPC with no time limit.
What is the business going to do with the money? Nobody knows. Maybe she will stumble upon something by chance.
But what a foolish way to invest – buy a stock 25 times its probable value … give your money to people who, just six months ago, warned of the possibility of bankruptcy … hoping they find something else. Just thinking about it, we are dizzy.
A stroke of genius
But the party is not over …
AMC then pulled off one of the smartest moves we’ve seen – a maneuver that could open up a whole new level of hype… and madness. The company decided to go directly to the players who were pushing the title up.
Here is the announcement … a piece of genius
“AMC Entertainment Holdings, Inc. (NYSE: AMC) (‘AMC’ or ‘the Company’), today announces the launch of AMC Investor Connect, an innovative and proactive communications program that will connect AMC directly to its extraordinary base of enthusiastic and passionate individual shareholders, in order to keep them up to date with important company information and to provide them with special offers. In recent months, AMC has seen its individual shareholder base surpass three million. With this considerable figure […], AMC takes a revolutionary new approach to investor relations and communications. […]
Starting today, shareholders can sign up to receive special offers and stock market updates by signing up at amctheatres.com/stockholders. Investors who register from today and in the weeks to come will receive a first free offer: a voucher for popcorn, redeemable this summer during a screening at an AMC cinema in the United States. “
Bloomberg’s Matt Levine sums it up this way:
“If you buy AMC stock, you’ll get popcorn. “
AMC is venturing where no other company has ever been … into the heart of Reddit darkness … where it can fan the flames of excitement for its new product.
We are not talking about his old cinema chairs; nobody cares. We are talking about his real product – his own actions.
An encyclopedia of things to avoid
What do we remember from this story? That the price of a stock, on its own, doesn’t contain a lot of information. In the case of AMC, if you link it to the rest of its history, you have a virtual encyclopedia of what not to do when it comes to investing.
An overheated market… free fake money… over-publicized action… a bubble atmosphere… Too much debt… fragile activity… declining sales… huge volume… staggering volatility…
And what do we see? What is the Market whispering? That the company is worth 25 times more in June than in July?
Or that the entire market is on its way to a disastrous end… like the cynical version of the film Independence Day, where aliens attack Earth – and win!
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