A Year Removed From “Meme Stocks” Craze, AMC Restructuring Debt
As Meme Stock Ride Ends, AMC Looks to Refinance
Some 12 months removed from the meme stock craze that saw AMC’s (AMC) stock price soar, most of those gains are now lost. Shares were down 39% so far this year through the end of Monday trading.
AMC executives took on expensive debt to withstand the pandemic, and the company is now shedding those bonds. Analysts point out this could increase the difficulty of refinancing, given bond yields will rise as prices decline. Still, reports indicate AMC is considering several deals that would lower interest payments and push out when its debt obligations come due.
The Rise (and Fall) of Meme Stock AMC
While AMC is now well-removed from its meme stock highs, it’s worth noting how the company got to this point. As hedge fund investors bet on the movie theater industry’s imminent collapse, individual investors came to AMC’s rescue — avoiding bankruptcy and leaving those investors owning around 80% of the company. From that point on, analysts say mistakes were made and some similar problems have resurfaced.
Twice last year shareholders balked at a plan that would have allowed more shares to be sold, citing concerns about diluting the company. Now, AMC can’t issue stock to cover debt obligations. Movie theaters like AMC also continue to struggle in their push to get people out to the movies, with Spider-Man: No Way Home offering a quick shot in the arm rather than a sustainable trend.
Retail Investors Hold On
A number of individual investors say they continue to hold shares of AMC — an act of defiance against the hedge funds and Wall Street institutions that bet against the stock by selling it short. Such a mindset is part of what drove such a surge in AMC’s price when the meme stock frenzy first began.
Some investors who still own shares of AMC express hope its price will rise again. Others say keeping the stock in their portfolio is a way to direct awareness toward what they see as a lack of fairness and proper regulation in the financial system. In any case, even as the original meme stock craze fades, a new era for AMC may lie ahead as the company seeks to shore up its financial situation.
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