- AMC shares sank as much as 17% Thursday after the company said it plans to sell up to 11.6 million shares.
- AMC, which is at the center of a fierce rally driven by retail investors, said it didn’t know how long the volatility would last.
- The movie-theater chain told investors they may lose the money they put into its Class A shares.
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AMC tumbled more than 30% during Thursday’s session after the movie-theater chain at the center of a massive rally fueled by retail traders on Reddit and Twitter filed a plan to sell nearly 12 million shares and cautioned investors they face potential losses.
The company reached an agreement with investment bank B. Riley Securities and Citigroup Global Markets Inc. to act as agents to sell up to 11,550,000 Class A shares from time to time, according to a filing with the Securities and Exchange.
AMC slid as much as 34% as it hit an intraday low of $41.25 then pared the loss. Investors yanked AMC sharply lower as potential share sales risk reducing the value of already available stock by increasing supply. Trading in AMC was halted three times before 10 a.m. Eastern Time on the New York Stock Exchange because of volatility.
“We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last,” AMC said.
“Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment,” it said.
AMC on Wednesday finished 95% higher despite a share dump from hedge fund Mudrick Capital, as retail traders active on Reddit’s WallStreetBets and other social media sites have been working together to squeeze short positions. Short-sellers betting against AMC lost $2.8 billion on Wednesday alone as shares surged as much as 127%, according to data from analytics firm Ortex.
The recent rally was set off by major shareholder Dalian Wanda Group selling almost all of the remainder of its stake in AMC. Redditors responded by cheering the newly available shares and making their newfound weight felt in the market. Last week, AMC soared by 116%.
Mudrick Capital disposed of its AMC stake after concluding the stock was overvalued and carried higher by a wave of enthusiastic day traders, Bloomberg reported on Tuesday. AMC said it would use the $230.5 million it raised from Mudrick’s purchase to make upgrades at its movie theaters and potentially make acquisitions.
AMC said Thursday is aiming to use any net proceeds from share sales for general corporate purposes, which may include repaying or refinancing debt or for capital expenditures.