Did the Reddit Rally Save AMC?

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Who would have thought that a platform like Reddit would drive the attention of the entire investing world toward just a handful of stocks? Everyone has heard about the GameStop short squeeze at this point. You don’t even have to be in the stock market; it’s been the news of the month. And AMC Entertainment Holdings (NYSE: AMC) shares have been getting just as much buzz. The movie theater chain was on its death bed because of the COVID-19 pandemic, economic shutdowns, and social distancing, before successfully procuring capital to carry it through.

With retail investors going on a buying frenzy, AMC shares were up over 800% at one point in the last month. Even after a marked correction, AMC shares are still up around 300% for the year. These are huge stock returns. But past the Reddit mania, does AMC have a chance? Does the movie theater chain have what it needs to survive?

AMC got one big gift from the trading frenzy: It was able to raise more capital. On Jan. 27, AMC announced it had sold $304.8 million of stock. Here’s the cruel irony: The bulk of the stock’s rally took place after it raised capital. Imagine the financial position that AMC could be sitting in if it had sold stock a few days later at $17 per share, rather than at $4.81 per share. It was the difference between raising $304.8 million and $772.45 million.

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