What happened
Shares of AMC Entertainment (AMC 9.56%) ended the week 28.1% higher than where they closed last Friday, according to data from S&P Global Market Intelligence, after posting four out of five days of gains and continuing a winning streak that began nine days ago.
Since closing at $13.56 on March 14, its lowest point since last May, the movie theater operator's stock has rallied 49% higher. Despite being down 72% from its 52-week high achieved during the meme stock trading frenzy last year, it remains 143% above its absolute low point a year ago.
Image source: Getty Images.
So what
The spark that ignited the rally was AMC's somewhat baffling purchase of a stake in Hycroft Mining (HYMC -1.60%), an all but defunct gold and silver miner in Nevada that shut down production in November because it was strapped for cash.
AMC invested $28 million into the miner in exchange for a 22% ownership position, and it was joined by precious metals investor Eric Sprott, who put a like sum into the company. The miner wasted no time cashing in on the spike in its own stock price, and on Friday completed an at-the-market equity offering that resulted in gross proceeds of $138.6 million. Coupled with the investments, Hycroft has raised $195 million in two weeks.
For many, AMC's investment is seen as a low-risk, high-reward deal. With $1.8 billion in liquidity available to it, the money it put into Hycroft is negligible, but could result in outstanding returns if the miner is successful in resurrecting its business.
AMC's CEO Adam Aron maintains the cinema operator's business is on cruise control at the moment, so using the opportunity to expand beyond the normal confines of the big screen is one to be seized.
Now what
AMC's stock rally has also breathed new life into the internet chatroom crowd that has supported the theater chain over the past year. While there's been a large cohort that has publicly maintained they've held strong on to their shares in hopes the "mother of all short squeezes," or MOASS, strikes, those who jumped onto the bandwagon late have been demoralized by the steadily declining stock. The rally has given hope to everyone.
That's because AMC remains a heavily shorted stock with one-fifth of its shares outstanding sold short. If the self-described "apes" can keep the momentum going, lifting AMC's share price even higher, it just might initiate the short squeeze they've been looking for.
