There are a lot of interesting stories in the market this week, and I figured I would highlight a few of them in case they weren't getting enough attention. AMC Entertainment (AMC 4.61%) left us all scratching our heads after announcing an investment in a tiny gold mining company. Chinese stocks finally caught a break after regulators made encouraging remarks. Lastly, we have oil prices temporarily moving lower.
Let's take a closer look at these three stories. They're pretty crazy when you think about them.
Image source: Getty Images.
1. AMC strikes gold for its silver screen
The country's leading multiplex operator has done a lot of questionable things over the past two years. It diluted its shareholders by having its share count explode fivefold as a way to get through a cash crunch. It's put a lot of time and energy into accepting crypto payments for movie tickets and concessions -- and not stablecoins -- so we're talking about creating taxable and reportable gains and losses for consumers for every transaction that they somehow choose to pay for with their cryptocurrencies.
But nothing comes close to its decision this week to purchase a 22% stake in a speculative penny stock. AMC's decision to invest $27.9 million in Hycroft Mining (HYMC +6.23%) was unexpected. The deal is too small to move the needle at a company with an enterprise value of $17 billion. How will even a passive investment in a loss-saddled mining company be anything more than a distraction for a company that already has a tall task to tackle in getting out of its own deficit hole? Was there a method to this mining madness?
AMC is playing on offense again with a bold diversification move. We just purchased 22% of Hycroft Mining (HYMC +6.23%) of northern Nevada. It has 15 million ounces of gold resources! And 600 million ounces of silver resources! Our expertise to help them bolster their liquidity. pic.twitter.com/LihqZguwnd
-- Adam Aron (@CEOAdam) March 15, 2022
Wait a minute. AMC's CEO says that what it brings to the table at Hycroft Mining is its expertise in improving Hycroft's liquidity? All AMC did was go from a little more than 100 million shares outstanding to more than 500 million in two years by printing new stock. Hycroft is already jacking up its share count by mining new shares for AMC. It's dilution, not rocket science or Col. Sanders' secret recipe.
The only feasible explanation here is that AMC felt that its involvement in a penny stock would jack up the price of the microscopic miner, but that didn't exactly pan out. Aron's legal team had him pull out of a CNBC appearance the day the deal was announced.
I want to apologize to @jimcramer and @davidfaber, two extraordinary journalists, for canceling my CNBC interview with them today at the last minute. I am excited about our investment in HYMC, but there has been so much volume in that stock today, lawyers insisted I stay off air.
-- Adam Aron (@CEOAdam) March 15, 2022
The hype train soon derailed. Hycroft Mining's stock nearly doubled at the open following the initial investment news, but that 95% gain was wiped out entirely by the end of the following trading day. It was a round trip to nowhere.
NYSE: AMC
Key Data Points
2. Chinese growth stocks bounce back
Sometimes it's darkest before the dawn. Chinese growth stocks have been falling hard in recent months, and there are plenty of logical explanations for the cascade. Trade tensions between the U.S. and China led to some delistings and proposed delistings. China's government cracked down on some industries, including gaming and for-profit education. Tech giants found themselves cutting big checks to the government to bolster the "common prosperity" mantra that cast consumerism in a negative light.
In a surprising turn this week, China's top economic advisor made some favorable comments about the stock market after a special session of the State Council's Financial Stability and Development Committee. Vice Premier Liu He said that Beijing was pledging to keep the markets stable and support the economy. That sent the basket of Chinese tech stocks that were trading at 21-month lows sharply higher. US Tiger analyst Bo Pei would go on to upgrade the entire Chinese interest sector following the encouraging shift in regulatory policy.
3. Oil goes down, and then back up again
The pain at the pump is real, but it seemed as if relief was on the way earlier in the week when the price of a barrel of crude oil fell below $100 for the first time in two weeks on Tuesday. The commodity news coincided with investors rotating out of the red-hot energy stocks and back into the cold and blue growth stocks that had been languishing since peaking last year.
Politicos even began pressuring gas station operators to lower their prices to match the quick reversal in oil prices, but like a bad game of Donkey Kong, sometimes the barrels get in the way. Crude oil prices broke through the $100 ceiling again on Thursday, and by Friday morning the price was already back to where it was at Monday's close.
We're still far away from the March 7 peak when oil briefly topped $130 a barrel, but it's an important reminder that market prices written in beach sand will always change as the tide goes in and out.
