What happened
Shares of AMC Entertainment (AMC -0.88%) were running 7.5% higher at 10:35 a.m. ET on Wednesday, one day after the movie theater operator surprised the markets with news it was investing in a gold and silver mining company.
Although Wall Street was perplexed by the deal, small retail investors seemed to stand behind the cinema owner's decision to branch out in new directions.
Image source: Getty Images.
So what
Buying a miner is not what anyone expected AMC to do, especially one that ceased operations last November due to a lack of capital. Yet it was precisely that factor that induced CEO Adam Aron to invest $28 million in Hycroft Mining (HYMC 10.60%).
Aron said he believed AMC's experience through the pandemic could lend itself to helping other companies in similar situations. The equal investments that AMC and metals investor Eric Sprott have made in Hycroft could spur the miner to restart operations. It is using the money received to hit up the capital markets for another $500 million.
Now what
AMC's investment for a 22% stake in Hycroft is viewed by some as a low-risk deal because even if the miner still goes under, it's a relatively small amount of money the movie theater stock is putting into play in terms of the $1.8 billion in liquidity it has available. And if the miner pulls it off, it could generate a decent return.
