Shares of AMC Entertainment Holdings Inc. swung to loss in early trading Thursday, after the movie theater operator announced a deal to sell up to 11.6 million shares, as it takes advantage of the recent trading frenzy to raise cash.
dropped 4.5% in premarket trading, reversing an earlier gain of as much as 11.9%. The pullback comes after the stock rocketed 95.2% on Wednesday, and 417.8% over the past seven sessions, amid renewed interest in meme stocks.
“We believe 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 statement in 8-K filing with SEC
AMC disclosed in the filing that it entered into an equity distribution agreement with sales agents B. Riley Securities Inc. and Citigroup Global markets Inc. for the sale of up to 11.55 million shares. Based on Wednesday’s closing price of $62.55, the shares could be valued at $722.5 million.
The sales will be made “at the market” from time to time, based on the company’s instructions, including price, time or size limits specified by AMC. The company will pay the sales agents a commission of up to 2.5% of the sales price of the stock.
The sales deal represents up to 2.6% of the shares outstanding.
The company said it plans to use the proceeds from the share sales for general corporate purposes, which could include repayment of debt, acquisition of theater assets or capital expenditures.
AMC acknowledged in an 8-K filing with the Securities and Exchange Commission that recent “extreme fluctuations” in its stock have been accompanied by reports of “strong and atypical retail investor interest, including on social media and online forums.” As a result, AMC’s stock sale plan comes with a warning for retail investors:
“We believe 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,” the company said in a statement. “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.”
AMC’s stock has soared 2,850.5% year to date through Wednesday, while shares of fellow movie theater operator Cinemark Holdings Inc.
have rallied 43.4% and the S&P 500 index
has gained 12.0%.