AMC Entertainment Holdings (AMC 3.72%) continues to exploit its meme stock designation by raising capital as its shares have risen exponentially on the backs of retail traders and others driving short-sellers out. Today, the company filed to sell up to another 11.55 million shares after the stock almost doubled yesterday alone, and is up 280% in just the last week.
Today's announcement came with a warning for investors looking to buy shares, and promptly eliminated a 20% pre-market gain in the stock. AMC has embraced the frenzy, raising $230.5 million in a share sale earlier this week, and launching AMC Investor Connect yesterday, aiming to utilize the euphoria in the stock to help the business.
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AMC said it now plans to sell up to 11.55 million shares "from time to time" at market prices. The company also acknowledged the disconnect of the stock movement from the underlying business, noting that shares have "recently experienced, and may continue to experience, extreme volatility, which could cause purchasers of our Class A common stock to incur substantial losses."
AMC has accumulated debt and diluted shares as it has navigated through theater closings and movie release delays through the pandemic. Now that the business itself is recovering, the company is taking advantage of the retail trading mania to help reduce debt and improve flexibility with additional capital. In its earlier equity raise announcement this week, the company said proceeds would be used primarily "for the pursuit of value creating acquisitions of additional theatre leases."
Today's filing specified use of the funds "may include the repayment, refinancing, redemption or repurchase of existing indebtedness, acquisition of theatre assets, working capital or capital expenditures and other investments."
Investors should heed the company's warning of volatility and a potentially large reversal in the recent moves. But for the long term, the company is doing what it can to take advantage of the situation to right the business.
