AMC Entertainment Holdings Inc. AMC 22.66% took advantage of a skyrocketing stock price last week to sell shares to a hedge fund for $230.5 million, it disclosed Tuesday, news that drove its stock higher still.
The hedge fund that bought the shares, New York-based Mudrick Capital Management LP, was a winner too. It had paid a premium to Friday’s closing price but promptly turned around and sold for a profit, according to a person familiar with the matter, unloading all 8.5 million shares it received in the deal.
AMC’s share price soared as high as $33.53 before ending the session at $32.04, a 23% jump. The movie-theater chain’s stock price is up more than 1,400% for the year, including a furious 116% climb last week.
AMC has been a favorite among individual investors on social-media platforms such as Reddit, and the stock was one of the original meme stocks that soared during a frenzied rally in January.
Mudrick Capital sold the shares it bought—its entire equity position in AMC—on the belief that the stock is overvalued, the person familiar said. The fund never intended to hold a long-term position in the stock and has similarly sold positions in AMC before, the person said, adding that Mudrick continues to own AMC debt.
News of Mudrick Capital’s sale was earlier reported by Bloomberg News.
The hedge fund bought the shares at about $27.12 apiece, AMC said in a news release, a 3.8% premium to Friday’s close of $26.12. The price at which the fund sold wasn’t immediately clear. A representative for AMC couldn’t immediately be reached for comment.
AMC shares finished last year trading around $2, and the company warned in December of the possibility of bankruptcy after the Covid-19 pandemic scrambled its operations.
That was before Mudrick Capital threw the company a lifeline. In December, AMC said the hedge fund committed to supplying $100 million in debt financing and would exchange another $100 million in existing debt into equity. Mudrick Capital was later rewarded with sizable profits from its AMC trading positions after the January meme-stock rally.
Individual investors continued to bid up the shares Tuesday. “DIAMOND HANDS BABY, NOTHING CAN LET ME SELL,” one user posted on Reddit.
AMC said in its news release and in securities filings that it plans to use the proceeds from the stock sale for additional theater leases, as well as for funding investments in its existing theaters. It also intends to “continue exploring deleveraging” opportunities.
“AMC is being presented with highly attractive theater acquisition opportunities,” AMC Chief Executive Adam Aron said. He added: “It is time for AMC to go on the offense again.”
Write to Caitlin McCabe at [email protected]
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Appeared in the June 2, 2021, print edition as ‘Shares of AMC Soar After Company Gets Fresh Funds.’
