AMC Theaters, an American movie theatre chain headquartered in Texas, saw a drastic increase in their stock which skyrocketed to almost 300%, saving the company from its recently filed bankrupt status, Deadline reported.
This bizarre jump in stocks happened recently after the stock purchase frenzy started by Reddit users. Following this, private equity firm Silver Lake sold its entire stake in the theatre chain for $713 million.
Due to the ongoing Covid-19 pandemic AMC, had to close down over 1,000 theatres and suffered heavy losses due to the rise in streaming service. According to ScreenRant, even on Monday, AMC, which was acquired by China’s Dalian Wanda Group in 2012, had earlier warned that it was on the brink of bankruptcy until a $1 billion fundraiser saved them.
According to the report in Deadline, Silver Lake Group converted $600 million worth of the theatre chain’s debt that it holds into stock at a conversion price of $13.51 a share. The report also mentioned that the investment firm had partnered with AMC in 2018 with a cash injection in exchange for $600 million in unsecured convertible notes. According to Investopedia, unsecured convertible notes are a type of long-term debt issued by a company that can be converted into shares of equity stock after a specified period.
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A group of small or independent traders on a Reddit discussion board made a plan to drive up the share prices of struggling companies like AMC, GameStop, BlackBerry, and others. The hashtag #SaveAMC trended on several online platforms. According to Market Watch, shares of AMC, which were severely impacted during the ongoing Covid-19 pandemic, rose by 600% this year.
Market Watch also reported that Silver Lake cleared a profit of roughly $112 million on Wednesday by selling 44.4 million shares. CEO of AMC, Adam Aron, told Market Watch, “Any talk of an imminent bankruptcy” is now “completely off the table”.