What happened

Shares of AMC Entertainment (AMC -0.48%) were 3.4% higher at 11:24 a.m. ET on Wednesday after the movie theater operator filed a statement with the Securities and Exchange Commission that it now owns a 6.8% stake in National CineMedia (NCMI 4.30%), which runs advertisements on movie theater screens.

CEO Adam Aron has said he would be making more investments using the $1.8 billion in liquidity AMC has available, and a purchase like this is probably what most people had in mind. The theater operator caught people by surprise when it previously announced it was taking a stake in defunct gold and silver miner Hycroft Mining

Movie theater projector booth.

Image source: Getty Images.

So what

National CineMedia is a holding company whose sole purpose is to operate National CineMedia LLC (NCM), which distributes ads to theaters. Rival theater chains Cinemark and CineWorld's Regal movie theaters own more than 51% of NCM. AMC now becomes the third-largest owner of the business. It's not the first time it has owned a piece of it.

When AMC acquired Carmike Cinemas back in 2016, it was forced by the Justice Department to reduce the stake it held in NCM at the time in order to preserve competition with its only meaningful rival, Screenvision Media. AMC eventually sold all of its holdings in NCM.

Now what

Business has improved at the box office, though it remains below pre-pandemic levels, but AMC's own financials improved this past quarter. The investment seems to be a bet that theaters will continue to progress. 

Shares of National CineMedia are up 7.6% in morning trading after having traded as much as 20% higher. AMC's stock had been up as much as 6.5% when the market opened.