Meme stocks reversed sharply lower Wednesday as GME stock and AMC stock shed some gains from the week's massive rally. Meanwhile, AMC moved to use the gains to scratch off more debt.
AMC Theaters on Wednesday said it entered a private debt/equity swap agreement to exchange 23.3 million shares of newly-issued stock in exchange for $163.9 million worth of company bonds due in 2026. The shares were issued at an average price of $7.33 per share, according to the filing.
The deal is part of a larger effort for the theater chain to shed some its long-term debt, which stood at $8.6 billion at the end of 2023, according to MarketWatch. AMC on Monday raised $250 million after selling 72.5 million shares at an average price of $3.45 per share.
Barrington analyst James Goss in a Tuesday research note said the recent meme surge presents an opportunity for AMC to raise funds, The Fly reported. The first quarter marked a "difficult start" to the year and Q2 is off to a slow start as well.
The recent rally "presents an additional opportunity to raise equity funds that can support liquidity and debt reduction," Goss said. The hope is that AMC eventually moves to a capital structure that could facilitate institutional support. However, "significant uncertainty" remains due to AMC's high leverage and current capital structure. Barrington kept a market perform rating on AMC shares.
Return Of Roaring Kitty
Meme stocks soared on Monday and Tuesday after Keith Gill, known online as Roaring Kitty, made his return to social media Sunday night following a three-year hiatus. Gill gained notoriety in 2020 and 2021 as one of the key drivers for the GameStop short squeeze. The former financial broker and analyst was eventually called to testify in front of the House Financial Services Committee in February 2021 regarding a probe on potential market manipulation.
Meanwhile, GME short sellers suffered roughly $2.2 billion in mark-to-market losses through midday Tuesday as meme stock prices roared, according to data firm S3 Partners.
AMC And Meme Stocks Reverse
AMC stock dived 20% Wednesday as meme stocks reversed lower. Still, rallied more than 88% so far this week.
GME stock tumbled 18.9% Wednesday. GameStop pared its gains on the week to 126.5% following Wednesday's decline.
Virgin Galactic descended 16.5% Wednesday, now up 11.3% this week.
Koss plummeted 19.2% Wednesday, but still advanced 55.4% so far this week.
BlackBerry retreated 6.9% Wednesday. BB stock advanced 11.4% this week through Wednesday's close.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
