What happened
Shares of AMC Entertainment (AMC 1.11%) climbed 12.2% during regular market hours on Tuesday before soaring an additional 50% in after-hours trading.
So what
AMC's gains came after the movie theater chain -- which has struggled with coronavirus-related closures and sagging attendance during the pandemic -- said on Monday it had raised a total of $917 million in financing. CEO Adam Aron said the cash would allow AMC to fund its operations "deep into 2021."
AMC Entertainment's recent gains accelerated late on Tuesday. Image source: Getty Images.
A short squeeze is also likely contributing to the steep rise in AMC's share price. Many individual traders have been coordinating their stock purchases on sites like Reddit in an attempt to pressure short sellers. To exit their positions, short-sellers must buy back the shares they sold short -- a dynamic that can drive the price of a heavily shorted stock, such as AMC Entertainment, even higher.
Now what
Although AMC is now on steadier ground after bolstering its balance sheet, the company is still burning through cash. Until people feel safe enough to return to crowded movie theaters en masse, AMC's losses will continue to mount. Thus, despite its recent gains, the beleaguered theatre chain remains a high-risk investment.
