AMC Stock Soars Despite Massive Sell-Off From Hedge Fund Giant Mudrick

Last Updated on June 3, 2021

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AMC stock soars despite massive sell-off from hedge fund giant. The 8.5 million shares in the cinema chain were sold Tuesday after Mudrick Capital Management decided the stock was overvalued, in a Reddit-like attempt at a quick buck.

 

Mudrick’s plan worked. Almost as soon as it bought the massive 8.5 million share load, it sold it all, making $25 million in the process. The pump and dump scheme didn’t cause as much deflation in AMC stock as the investment firm thought, as stock prices continue to rise in the pre-market Wednesday.

 

The move by the Wall Street giant is being compared to the Reddit schemes in January that saw “meme” stocks like AMC, GameStop, and BlackBerry explode despite a lack of profits from each company. GameStop’s stock price rocketed 1,600 percent in a scheme led by small investors through social media like Reddit. AMC is up 1,000 percent YTD due in large part to similar tactics. Mudrick thought it could execute its own scheme Tuesday, flipping the shares it purchased from a private placement almost as soon as the money left the account.

 

The bold move did cause a roller coaster ride for the share price, which ended the day Tuesday just under the previous day’s $32.04 close. Then, in an unexpected turn, AMC’s value in the pre-market exploded, gaining as much as 36 percent from the day prior. Its $39.37 high has since fallen slightly, but the value is still significantly higher than what analysts believe the media chain is worth.

 

Mudrick Capital Management’s tactics painted a target on its back. After its high-risk scheme, the Mudrick Wikipedia page was hacked. Though the hedge fund manages approximately $3.8 million, the Wiki article claimed it “is an investment firm specializing in losing money.”

 

The page also read that “the firm is located in New York City, and as of June 2021, managed approximately $0.0 in assets. Due mostly, to bad decision making regarding AMC.”

 

The high-risk investment firm, founded in 2009 by Jason Mudrick, was likely targeted for its AMC tactics, though why any AMC investors would be angry is anyone’s bet. The price saw record highs with little change when the market opened Wednesday.

 

The hedge fund did however overvalue AMC stock, according to analysts, giving the company a $13 billion valuation with its individual share price of $27.12. 

 

This is a massive increase, especially since AMC dipped to $4 only six months ago as the theater company neared bankruptcy. Though as Covid-19 restrictions begin to drop, the company was likely to see a spike. But one of this size is still quite surprising.

 

“I’ve never seen anything like this,” Rich Greenfield said, an analyst for LightShed Partners. “Good news is positive for the stock; bad news is even better.”

 

AMC stock prices soar, but not because of ticket sales. Mudrick Capital Management used Reddit-like tactics to make a quick buck.
AMC stock prices soar, but not because of ticket sales. Mudrick Capital Management used Reddit-like tactics to make a quick buck. Photo Credit: Shutterstock

 

AMC does have a bit of good news for its investors, though analysts still fear the stock is wildly overvalued. The box office buzz from John Krasinski’s A Quiet Place, combined with Memorial Day Weekend, drummed up a large crowd in theaters across the United States. As people get vaccinated and theaters open up, there is a lot of confidence that the movie industry will get back on track.

 

Still, ticket sales were down about 50 percent from the $230 million in box-office sales on Memorial Day of 2019. AMC is not expected to make profits until the end of the year, and only narrowly avoided bankruptcy after a $917 million bailout last year.

 

The chief market strategist at Jones Trading, Michael O’Rourke, explained that the “meme” stock fever and heavy investments in the market are due in part to easy money from the Federal Reserve, which he says has “created an almost video game-like atmosphere in the stock market and investing.” He pointed out that “there’s money flowing everywhere and this is a great illustration of that.”