In the first quarter of 2021, AMC Entertainment Holdings Inc (NYSE:AMC) became one of the most popular meme stock investments in the market.
A year later, the movie theater chain's rebound from the pandemic hasn't gone as well as investors had hoped, and the company's latest decision to buy a struggling gold mine rather than pay down its more than $5 billion in debt has some analysts concerned that AMC management is getting increasingly desperate.
The Numbers: In the fourth quarter, AMC reported yet another net loss of $134.4 million and revenue that is still 19.2% below 2019's pre-pandemic levels. In February, the company announced a refinancing of more than $5 billion in debt it is carrying on its balance sheet.
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Despite the company's ongoing struggles, AMC shares are up 583% since the beginning of 2021. AMC narrowly avoided bankruptcy early last year by aggressively selling shares of stock to stay afloat. AMC's shares outstanding have now more than quadrupled since the beginning of October 2020.
After peaking at $72.62 in June 2021, AMC shares are trading all the way back down around $15.
AMC's Mining Investment: AMC took the market by surprise this week when the company announced it acquired a 22% stake in gold and silver miner Hycroft Mining Holding Corporation (NASDAQ:HYMC) for $27.9 million.
In AMC's press release, CEO Adam Aron took credit for "guiding a company with otherwise valuable assets through a time of severe liquidity challenge, the raising of capital, and strengthening of balance sheets."
On Tuesday's Benzinga PreMarket Prep, co-host Dennis Dick said it's "disgusting" to see Aron take credit for AMC's surging stock price in 2021.
"This was not his doing that — oh yes, he was the one that got AMC to go to $70 a share and it was all his great management that caused this to happen. That's not the case whatsoever. He lucked out that Reddit and WallStreetBets and obviously everybody else just jacked his stock price and he was able to sell stock and put it in his own pocket because he sold half of his holdings," Dick said.
Dick said the decision by Aron and AMC to use the money they were gifted from AMC retail investors to buy a penny stock mining company is a sign the company has no idea what it's doing at this point.
Keeping The Meme Alive: David Trainer, CEO of New Constructs, said this week that the Hycroft is the latest in a series of ploys, including offers of free popcorn and repeated updates about accepting memecoins and other cryptos, aimed at keeping AMC's online meme movement alive.
"AMC Entertainment's irresponsible decision to purchase a stake in a gold miner is a misallocation of capital and it makes absolutely no sense for AMC Entertainment's business," Trainer said.
"AMC Entertainment's reckless decision to purchase a stake in a gold miner reinforces our view that AMC Entertainment's stock could decline to zero per share."
Benzinga's Take: A certain number of AMC investors will clearly support the stock and the management no matter what happens with the company or its share price. AMC also still has a relatively high short percent of float at 20.8%, according to ORTEX Analytics.
Photo courtesy of AMC.
