Please ensure Javascript is enabled for purposes of website accessibility

AMC Entertainment Is Selling $230 Million in Stock to Finance Acquisitions

By Rich Duprey - Jun 1, 2021 at 9:27AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The theater operator just sold 8.5 million shares at a premium.

AMC Entertainment Holdings (AMC -4.01%) is going on the offensive, selling over $230 million worth of stock to hedge fund operator Mudrick Capital Management at a premium so it can use the proceeds to make acquisitions.

The theater operator is selling 8.5 million shares to the private equity firm at a price of $27.12 per share, a nearly 4% premium to Friday's closing price of $26.12 per share. It says it intends to make "value creating acquisitions of additional theatre leases, as well as investments to enhance the consumer appeal of AMC's existing theatres." It may also reduce debt with the money. 

The elevated price might not be the $500,000-per-share moonshot Reddit traders are hoping for, but it suggests AMC sees continued growth in its future.

A father and son sit at a movie theater and share popcorn.

Image source: Getty Images.

Tomorrow's an important day for AMC stock. It is the date when shareholders of record are set, and that determines who will be able to vote at the upcoming shareholders meeting in July.

Internet chat rooms believe hedge funds are engaged in an extensive level of naked shorting of AMC stock. That's the illegal practice of shorting a stock without actually first borrowing the shares in a bid to drive down the price. The traders say the June 2 record date for stock ownership will expose the naked shorts and lead to the mother of all short squeezes, or MOASS.

AMC's sale of stock to Mudrick at an elevated price doesn't mean it's buying into this theory, though it does indicate it and the hedge fund see greater value for the stock in the future. It also could eventually initiate a squeeze, as higher prices could force short-sellers to cover their positions. 

Already the theater owner's shares are racing higher in premarket trading, even if it's not yet the stratospheric reaction some retail investors seek.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
$24.44 (-4.01%) $-1.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/13/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.