Please ensure Javascript is enabled for purposes of website accessibility

Why AMC Entertainment Stock Popped Today

By Howard Smith - Jun 1, 2021 at 8:58AM

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

Management is taking advantage of the momentum trading in the stock by raising additional capital.

What happened

Movie theaters are lifting mask mandates for vaccinated moviegoers, and the weekend release of A Quiet Place Part II became the biggest U.S. box office hit of the pandemic era. But that's not what's moving the stock of AMC Entertainment Holdings (AMC 7.56%) today. As of 9:40 a.m. EDT, shares were up 13% after jumping more than 20% to start the session.

So what

AMC stock popped today after the company said it sold 8.5 million shares to raise more than $230 million in new capital. That represents a sale price of $27.12 per share, compared to another share sale the company made just three weeks ago at a price of under $10 per share.

Four people grabbing at money falling from the sky.

Image source: Getty Images.

The company raised about $430 million on May 13, when shares had gained 500% in 2021 after the "meme stock" became the target of traders banding together to attempt to force a short squeeze. Just three weeks later, the stock's year-to-date gains sit at almost 1,400%. 

Now what

As AMC attempted to weather theater closures resulting from the pandemic, it raised capital several times prior to the most recent share sales. As a result, the company's debt has ballooned to more than $5.5 billion. AMC CEO Adam Aron said in a statement that proceeds from today's announced share sale to financial firm Mudrick Capital Management will partially be used to "continue exploring deleveraging opportunities." 

However, investors may be more excited to hear what the primary use of the cash infusion will be. Aron said it will mainly be used for "the pursuit of value creating acquisitions of additional theatre leases, as well as investments to enhance the consumer appeal of AMC's existing theatres." Investors that have been trading solely on momentum are feeling bolstered today that there may be some fundamental underlying business improvements to look forward to. 

Howard Smith 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.
$25.46 (7.56%) $1.79

*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 08/12/2022.

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.