AMC Stock Continues to Explode as Theater Chain Sells New Shares to Investor

Shares of AMC were breaking out on Tuesday, soaring over 20% as the theater chain revealed that it sold new shares to an investor.

The meme stock, which is popular on Reddit, has had 8 million shares sold to an investment firm. It was the latest move in a series of capital raises for AMC.

In a securities filing, the company said that it had raised $230.5 million through a stock sale to Mudrick Capital Management. AMC said it would use the funds for potential acquisitions, upgrading its theaters and deleveraging its balance sheet.

Shares were up 22.6% when the market closed.

Bloomberg News had also reported on Tuesday that Mudrick had sold all of its new shares in AMC.

Last week shares had doubled on high volume with the activity possibly connected to retail traders driving up the stock on Reddit boards.

As AMC share prices have soared, the company has sold off additional shares to raise cash. The stock is up more than 1,000% year to date.

“Given that AMC is raising hundreds of millions of dollars, this is an extremely positive result for our shareholders,” CEO and President Adam Aron said in a filing. “It was achieved through the issuance of only 8.5 million shares, representing less than 1.7% of our issued share capital and only a small portion of our typical daily trading volume.”

Roughly 20% of the floated shares of AMC are sold short, according to S3 Partners.

The securities filing from AMC, which closed Friday with a $11.8 billion market cap, also included a risk warning for investors: “Our market capitalization, as implied by various trading prices, currently reflects valuations that diverge significantly from those seen prior to recent volatility and that are significantly higher than our market capitalization immediately prior to the COVID-19 pandemic, and to the extent these valuations reflect trading dynamics unrelated to our financial performance or prospects, purchasers of our Class A common stock could incur substantial losses if there are declines in market prices driven by a return to earlier valuations.”

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.