AMC Stock Crashes After Record High: Why Did it Plummet? (UPDATE)

Last Updated on June 4, 2021

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AMC stock crashed just before market close Thursday after individual share prices reached record-breaking highs for the entertainment company. Hitting its peak at $68.80 a share, the meme stock quickly plummeted back to Earth, hitting many with catastrophic losses. The day’s close was $51.34 and has since dipped even lower in the premarket.

 

The massive $10 billion selloff came after AMC cautioned investors that the stock was overhauled, citing analysts who’ve continuously warned of an eventual collapse. The 40-percent drop for AMC stock wiped out $9 billion in market value, many investors backing off after the theater company claimed it was seeking funds by selling 11.6 million shares at market value.

 

The selloff escalated, likely sparking fear in investors who saw the price drop tremendously through Thursday. AMC stock also felt the brunt of the company’s warning, when executives cautioned people only to buy the stock if they were ready to lose all their money.

 

The share price rose and fell several times throughout the day Thursday, hitting over $50 and falling around $40 multiple times. The volatility of AMC stock is nothing new, though. The stock recovered Wednesday after Mudrick Capital Management dumped 8.5 million shares, making $25 million in the process. Though that massive selloff was expected to drive the price down, AMC quickly recovered and investors continued to buy-in.

 

The value in the premarket Thursday exploded, gaining as much as 36 percent from the day prior. The hedge fund planned to issue a Reddit-like rally against the AMC stock, but the plan backfired and the price rose significantly within 24 hours of the sale. Mudrick Capital’s 8.5 million shares would have been valued at $584 million at the stock’s highest peak Thursday.

 

Thursday morning the volatility of AMC stock caused major disruptions in the market, and the New York Stock Exchange halted the trading of shares twice in the morning. The stock exchange usually only does that to prevent inconsistent behaviors fueled by emotion, rather than true market values.

 

The sentiment-fueled trades leaked into other areas of the market, too. Bed, Bath & Beyond stock, which rose 62 percent on Wednesday, also dipped Thursday, dropping 26 percent. GameStop also fell victim, falling around 13 percent. It seems the Reddit revolution is starting to backfire, and the balloons are starting to pop.

 

In the premarket, AMC stock is down nearly $4 a share since Thursday’s close, with many likely scared of an eventual collapse. Analysts warn that the stock is still wildly overvalued, as a part of the meme-revolution that hit the market in January. The Reddit scheme saw “meme” stocks like AMC explode despite a lack of profits. Though most people avoided the movie theater chain during Covid-19, the stock is up over 1,000 percent YTD.

 

The volatility has yet to calm down, however, with share prices of AMC stock wavering between 2-3,000 percent higher than January. Now it’s likely that investors have realized that the stock is overvalued and will continue to pull out as the week ends.

 

However, the road has not been reached. AMC announced that early afternoon Thursday, the company had raised $587.4 million in new capital by selling additional shares of the stock at its $50.85 share price. The announcement caused a slight re-entry for some investors, pumping the price, but the interest has since wavered.