The ailing cinema operator AMC Entertainment has become a target for Wallstreetbets. Is GameStop history repeating itself?
After the spectacular pump of the Gamestop share a few months ago, the social network Reddit put the share business on hold for a while. Now the forum strikes again with full force. For a few days, the small investor collective has been working on the shares of the crisis-ridden cinema operator AMC Entertainment. The result: In just two weeks, the AMC rate has risen by 260 percent. At the beginning of the year, the unit price was less than three US dollars; it is currently 47 US dollars. Is GameStop history repeating itself?
Reddit is pumping AMC
We remind us: The stock market experienced a minor landslide in January when the Reddit forum Wallstreetbets took up the fight against the shortsellers and the price of the video game retailer GameStop skyrocketed. In order to cushion losses, hedge funds, which had previously bet on a falling price and de facto bankruptcy, were forced to buy back their positions. The plan worked: Small investors benefited from the dizzying price pump, the “instis” burned their fingers in the short squeeze and suffered billions in losses through the organized piracy on the stock market. Melvin Capital alone, the action cost half of the invested capital.
And history is currently repeating itself, even if the scene of the crime is different. In the sights of the Reddit speculators: inside this time the no less ailing company AMC Entertainment has come. The cinema operator was already in crisis before Corona; the pandemic-related closure of the chain has not improved the situation for the listed company. 2020 has a hole of $ 4.5 billion left in the company’s balance sheet. But although the cinema chain was already heading for bankruptcy, small investors have reanimated the company through mass acquisitions.
In numbers: Since the beginning of the year, the price of the AMC share has risen over 2,300 percent at the latest record high of 62 US dollars. While small shareholders rub their hands, hedge funds that have bet against a future for the company could find the cat-and-mouse game with Reddit to be dearly again. A chain reaction of GameStop proportions does not seem likely, however. The share of the shorted shares is currently “only” at 21 percent.
Discontinued model cinema chains?
It is absolutely clear that the AMC rally creates a huge gap between evaluation and reality. It is more than questionable whether the cinema business, which was already ailing before the pandemic, will be one of the successful business models after the crisis. Streaming services and the home cinema trend triggered by Corona are likely to continue to be difficult for the industry in the future. For AMC Entertainment, however, the capital grant on the stock market offers the opportunity to reposition the company for the future. GameStop also seems to have taken the opportunity to reorient itself on the crypto market. For example, the company is currently developing an NFT platform that will serve as a second pillar to ensure competitiveness for the future.
Whether AMC Entertainment will also use the momentum for itself or go under with a correction in the market is still open. For small investors, however, there is the chance to ride the AMC wave and get a piece of the pie – even without direct equity participation. About providers like FTX Investors can also trade tokenized shares without the conventional “curfew” on the traditional financial market.