AMC Finished Its Stock Sale. Its Shares Are Rebounding.

“Bringing in an additional $587.4 million of new equity on top of the $658.5 million already raised this quarter results in a total equity raise in the second quarter of $1.246 billion, substantially strengthening and improving AMC’s balance sheet, providing valuable flexibility to respond to potential challenges and capitalize on attractive opportunities in the future,” AMC CEO Adam Aron said in a news release.

The so-called meme stock said in the prior filing it would use any proceeds from the sale for “general corporate purposes, which may include the repayment, refinancing, redemption or repurchase of existing indebtedness, acquisition of theatre assets, working capital or capital expenditures and other investments.”

The company said earlier this week it sold 8.5 million shares to investment firm Mudrick Capital, which reportedly sold its stake at a profit that same day. Aron at the time characterized the stock sale not as mindless dilution, but “very smart raising of cash so that we can grow this company.”

AMC stock was up 6.6% to $66.65 just after 2 p.m. EDT on Thursday, rebounding nearly 80% from its intraday low of $37.66.

That drop comes on the heels of an incredible run for AMC stock on Wednesday that pushed the movie-theater chain’s market capitalization above GameStop ‘s (GME), its peer in the meme trade. The rallies in both stocks put short sellers betting against them down big.

AMC stock climbed 95% to $62.55 on Wednesday, bringing its market cap to $28.17 billion. GameStop jumped 13% to $282.24, hitting a $19.97 billion market cap. Shares of both companies have rallied amid heightened short interest, options volume, and enthusiasm from retail traders.

Ihor Dusaniwsky, managing director at the short selling analytics firm S3 Partners, told Barron’s he estimates AMC’s short interest was recently at 90.87 million shares, or about 18% of shares available for trading. He pegs GameStop’s short interest at 11.31 million shares or 19.8% of the float.

Dusaniwsky said short sellers betting against AMC were down $2.77 billion on Wednesday alone, bringing year-to-date losses to more than $5.22 billion. For GameStop, he estimates a loss of $375.7 million on Wednesday, and $7.15 billion in 2021.

Other meme stocks that surged on Wednesday were mixed on Thursday. Bed Bath & Beyond (BBBY) stock was down 27%, BlackBerry (BB) shares were up 1%, and GameStop was down 8.4%.

The recent resurgence of meme stocks has once again brought mainstream attention to Wall Street. On Reddit investing forums such as WallStreetBets and AMCStock, the recent action has been celebrated as a win for the average person. But not everyone has been so enthused.

“I never would have believed it, but the recklessness of a segment of retail investors appears to have no bounds in this market,” Whitney Tilson of Empire Financial Research wrote in a note Wednesday. “This type of short-term rally is to be expected, and for stocks like these, this is an opportunity to add to a short or put position because it’s clearly a dead-cat bounce.”

David Trainer, CEO of investment research firm New Constructs, wrote that AMC’s business was trending in the wrong direction before the pandemic. Since then, he noted that AMC has diluted existing shares via millions in stock sales, adding that the stock is worthless considering its debt load and weak earnings prospects.

“The surge in shares of AMC Entertainment is yet another sign of the reckless meme stock-driven investing landscape that we find ourselves in today,” Trainer said. “Wall Street insiders are preying on the naivete of retail meme stock traders. There is no fundamental reason to be buying shares of AMC Entertainment.”

What’s ahead for investors is anyone’s guess. Calling a top for meme stocks has been a fool’s errand this year. But eventually, the fundamentals will need to catch up to the valuation.

Write to Connor Smith at [email protected]