It's not exactly how anyone scripted the intersection between two of last year's biggest meme stocks, but GameStop (GME 1.07%) investors and AMC Entertainment Holdings (AMC 8.22%) fans are coming together this weekend. GameStop: Rise of the Players -- a documentary detailing how retail investors helped trigger the short squeeze that kicked off the meme stock revolution -- hits theaters over the weekend.
The timing could be better. Shares of the video game retailer just closed below $100 this week for the first time in more than 11 months. The stock's close on Thursday is 77% below last year's frenzied all-time high. AMC has fared even worse, closing 80% below its peak in June of last year. However, after AMC CEO Adam Aron mentioned last summer that the multiplex operator had approached GameStop about a partnership -- and nothing needle moving materialized -- the screening of a GameStop documentary at multiplexes including those owned by AMC will have to do for now.
Image source: Getty Images.
Playing to win
GameStop and AMC rocked the financial markets last year. GameStop came first with a meteoric rise in late January. Several other names followed suit, including the country's leading movie theater operator, which popped higher in late January -- only to climb even higher when it topped out in early June.
The dynamics of each surge were different. GameStop was heavily shorted, with more than 100% of its shares outstanding sold short. Many of the other meme stocks that followed GameStop higher in late January followed the same playbook of high short interest. AMC was the exception. Short interest has routinely clocked in between 10% and 20% over the past year.
The one thread that tied AMC and GameStop together is that they were retro brands that had been left for dead. GameStop sales for the fiscal year that ended in January of last year were 46% below the peak set five years earlier. AMC was generally holding up better on the top line, but industry multiplex ticket sales in the U.S. topped out nearly two decades ago. Whether it was nostalgia or online communities millions strong rallying behind Wall Street underdogs, retail investors bid up meme stocks despite the problematic fundamentals and grim outlooks for both companies.
The irony of the stocks crashing in recent months is that the same bonding that pushed the shares higher last year are helping make the platforms better even as the stock prices are cratering. AMC and GameStop now have more active investor audiences watching every leadership move, and that's powerful. The two companies never teamed up on the continuous esports league broadcasting partnership that many envisioned, but they have both arrived at the same conclusion when it comes to non-fungible tokens (NFTs) as a growth driver. AMC is offering NFTs to retail investors and to ticket pre-sale buyers. GameStop has its sights set on a NFT exchange.
The recent chart action suggests the documentary is too late. However, in some ways, the revolution could just be getting started if AMC and GameStop are making the most of the media attention to transform retail investors into retail customers, turning the fundamentals around for both companies in the process.
