Finances are so personal, and society tells us losses of any kind are deeply embarrassing. Loss aversion is what makes us feel the pain of losing more than the joy of our wins. Not something many people want to put out there publicly — on Reddit, the people posting about their Ls are generally anonymous. While I heard from some investors and their family members about experiencing big losses during the meme stock saga, none wanted to talk on the record. Coupled with its falling short interest — down to 18.5% of float from 19% last month — a collapse in price may not be imminent.
Are The Apes Now Running Wall Street?
Gill, a.k.a. Roaring Kitty — the financial wellness educator responsible for driving much of the pro-GameStop narrative — has stepped away from the spotlight. He and others involved in the GameStop saga testified before Congress about the matter in February 2021, at which time he proclaimed, “I still like the stock.” He hasn’t posted on his YouTube channel or under his Reddit name since April 2021. Per The Wall Street Journal, the median price target on AMC stock is $5 per share, while the high price target is just $16 per share. Compared to the current share price, these targets are much more reflective of AMC’s underlying value, where heavy shareholder dilution has outweighed the benefits stemming from the company cleaning up its balance sheet.
It’s just as sinister as the old penny stock “pump and dump” schemes where boiler room operators would cold call to bump up a stock price and then quickly cash out leaving suckers holding the bag. The underlying principle is the same, it’s just a lot easier to do now. Certainly, none of this frenetic activity has anything to do with fundamentals. For one, the pandemic ravaged its operations, and it’s still burning through quite a lot of cash.
AMC’s “Apes” Care About Their Agenda, Not the Company
The dust has since largely settled, with the influence of retail investors fading as markets have faltered. Many traders whose attention was piqued in the earlier days of the pandemic have moved on. It’s getting so there are new examples everyday where an online group agrees to target a stock and drives it up to absurd levels before it drops 20-30% or more in a few hours. It seems that participants in these online forums are posting notes with suggestions like “let’s drive up [insert company name] today” and then it happens. These groups seem to be acting in concert to manipulate the market by forcing short sellers to cover their resulting losses.
That may allow the company to avoid bankruptcy, but original shareholders have been diluted heavily and the company still has negative cash flows. Even in a peak year before Covid, AMC had less than $1 billion in free cash flow which compares unfavorably with its current $41 billion valuation. Pretty much the only consistent message you’ll find on Reddit, Twitter, Yahoo! These folks are so concerned with the idea that new shares being issued could disrupt their squeeze that they continue to deny AMC’s CEO his wish for improved financial flexibility. Last year, and in early January, before retail investors were able to effect a short squeeze in AMC, the company was forced to issue hundreds of millions of shares of new stock, along with debt that sported a double-digit percentage interest rate, to survive. The capital these share sales and debt issuances raised is what ultimately spared AMC from filing for bankruptcy.
Analysts from the sell-side are starting to issue warnings as well. After an injury forced him to bitmex review stop long-distance running, he found himself with more free time. A buddy had already caught the day-trading bug and passed it along to Collins. Rod Alzmann, one of the early winners in GameStop’s run, started researching and seriously investing in GameStock in 2017 and ran a website dedicated to doing research on the company and making the bullish case for it. He cashed out in January 2021, not when GameStop was at its peak but when it had gone up enough to deliver him what he says is some $2 million.
“Giving companies another shot at fixing their problems is always useful, but at what price to the individual investor? It had a rather atypical set of heroes and bitbuy review villains, though as these things always go, the real story of who was on what side was more complicated. No one can predict at this point how this will all play out, but investors would be wise to be very careful in trying to tame this gorilla. It’s a strange time to be an investor, but over time fundamentals will come back into play and the markets will revert to rational behavior.
- Perhaps the meme stock craze — and the continued but diminished interest in the companies involved — is nothing more than the Tinkerbell effect.
- It’s a strange time to be an investor, but over time fundamentals will come back into play and the markets will revert to rational behavior.
- Competitor Regal Cinemas announced a potential bankruptcy, which caused hysteria in the movie theater industry.
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However, at some point (it’s unclear when), the “apes” will finally pack in and take profits. As I’ve discussed previously, once this happens, AMC stock will fall to a price more reflective of its underlying value (under $10 per share). In short, AMC remains a speculative bet that holds a lot of risks. The company is stretching its efforts to last in a troubled industry, which could be to its advantage in the long run. However, retail investors still remain at risk during the process.
It turns out investing based on hype and vibes doesn’t really pay off.
Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. Chris Temple, a film director behind the upcoming documentary This Is Not Financial Advice, a film about the retail investing trend in stocks and crypto, compared the situation to the television and film series Jackass. Roth says what’s not being discussed is the government’s effect on inflation, from increased housing costs due to government regulations, to business and education prices. “We know that the way that the government calculates inflation is underreported. Ask any of AMC’s apes on social media, and they’ll proudly tell you they helped saved AMC from bankruptcy.
AMC was also dealing with a steady decline in movie ticket sales for nearly two decades prior to the pandemic, and management had extended the balance sheet by purchasing other theaters, as well. It’s now sitting on more than $5.4 billion in debt that, according to the 2027 bond prices, bondholders aren’t sure the company can pay back. In March 2022, Cohen revealed a major stake in Bed Bath & Beyond.
Regal Cinemas’ bankruptcy warning spooks AMC investors.
If enough people clap hard enough, believe hard enough, there’s value in that. But belief in a stock will only get you so far, whether you’re the investor or the company, whether you’re in it for the joke or not. “Preferred just means when the company goes bankrupt and liquidates and pays off its creditors — whatever’s left, the preferred shareholders get first dibs on it. “The market doesn’t quite get it at all, and they’re bidding down the preferred, but they’re all going to go down together.” In other words, it appears neither AMC shares nor APE shares are a particularly good investment.
He’s gotten rich, quickly, turning $8,000 in savings last December into roughly $1 million today through trading AMC stock and options. You see, at the start of 2021, a handful of stocks gained a cult-like following online. Part of their strategy involved orchestrating a “short squeeze” against big funds that were betting against the stocks by shorting them. There are some companies that are meme stocks, which might be interesting opportunities.
The companies at the center of the meme stock phenomenon are now navigating an existence where many of their investors, like Windsor, are operating on a more “gut feeling” level than market fundamentals. GameStop and AMC have taken distinct approaches to their respective meme statuses, and their business prospects differ significantly as well — though opinions on that vary, depending who you ask. Post-Covid, there is surely pent-up demand to return to movie theaters. People with big screen HD TVs at home are bingeing on Netflix NFLX or watching new movies on Disney+ and HBO Max at the same time they hit movie theaters.
With 950 locations, that works out to over $43 million/theater, but AMC doesn’t own most of those. WASHINGTON (SBG) – AMC Entertainment has seen a number of spikes in their stock value lately, thanks to a Reddit community that calls itself the “Ape Army” that has driven the recent stock volatility through a short squeeze. Instead, shares sold off as much as 17% this week following the announcement. AMC’s apes had the opportunity to finally do something good for the company twice, and both times they chose to vote down measures to raise capital.
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