The AMC case: the reckless investment the Robin Hoods like

AMC announced, on the American morning of Thursday 3 June, its intention to sell 11,55 million shares to raise liquidity for 722 million dollars. The money should be used for investments and new acquisitions, as well as to pay off part of the debts. The announcement posted on the SEC website was accompanied by a warning: "Under the current circumstances," it is read, the purchase is recommended only to people "prepared to run the risk of losing all or a large part of the money invested".

Movie theater chain AMC, which gained 95% and about 3000% year-to-date, is currently down 17%, after announcing plans to put more than 11,5 million shares up for sale. Investors shorting the stock estimated a $1,23 billion loss last week, rallying more than 116%. But according to data from S3 Partners, they lost $2,8 billion in one day on Thursday.   

"In the current circumstances, the purchase is recommended only to people prepared to run the risk of losing all or a large part of the money invested". With such an advertisement, you might say, even Apple would run the risk of a flop. But it takes much more to discourage the "monkeys", as the shareholders are defined who, in droves, have contributed to giving life to the craziest story (for now) of a crazy season of financial markets drunk on the rain of liquidity: the resistible rise of AMC, the most important cinema chain in the world, with 950 multiplexes in the USA and Europe where 10.500 films are shown a day. But the most exciting plot these days concerns the fate of the company, protagonist of the sensational Ponzi scheme of financial history. 

Let's start with a flashback, like in a self-respecting thriller. Despite the warning imposed by the authorities, the latest capital increase was successful within a few hours: 587,4 million dollars raised in a bang, which adds to another 658,7 million that entered the company's coffers. “In all – exults the CEO Adam Aron – they make over 1.246 million with which we will be able to face the attacks and seize the opportunities on the market”. 

Of course, as in any self-respecting battle, there are victims: AMC shares lost 17% on Thursday under pressure from sellers. But who cares? At Thursday's prices, AMC shares are up about 3.000% year-to-date, of which most of 2.000% accumulated in the last month.

On Wednesday the action hit its mark a stretch of 95% in a few minutes. The reason? Announcement of a gift to all members, old and new, as long as they join the shareholders' club: free popcorn for everyone. At the cinema of course. As if it were raining from the sky which, in the advertisements via twitter, is covered by an airplane flying over the Manhattan skyline dragging the banner: "With AMC, flying to the moon!". 

Here the last frontier of capitalism for all or, if you prefer, the last battle of libertarian America against the lords of Wall Street. After the fight up Game Stop, the small shareholders gathered around the Reddit chats, have lined up in defense of the cinema chain doomed to certain ruin according to the hedge funds at the bottom of a crisis without remedy: competition from streaming is increasing, takings are falling, many cinemas are destined to close after the damage inflicted by the pandemic. In short, a prey to be torn to pieces with short selling, especially after the Chinese Dalian, already the first shareholder, abandoned the game. 

ALSO READ: GameStop or game over for mass financial investments?

But no, legions of "do-it-yourself" shareholders shouted, probably the same ones who are buying up the shares of Blackberry and Game Stop, other stocks targeted by hedge managers. But this time the challenge presents some novelties. also something new, indeed very new for several reasons.

First, because the protagonists are not first hair kids who grew up on bread and the Internet. The real hero of the match is Adam Aron, a 66-year-old gentleman who has been leading the company since 2016 and who boasts a respectable career behind him. Second, in terms of size: AMC now has 3,2 million shareholders, mostly new members who have grown this year as the stock reached dizzying heights: more than 60 dollars against an average estimate by analysts of 5,11 .XNUMX dollars, which is falling rapidly.

Without, however, impressing too much Aron, 66, an old market fox who has a long history behind him as CEO of Philadelphia '76, the NBA team that he reawakened with a hefty cut in ticket prices and as administrator of the consortium of Vail, Colorado, where he earned his reputation as America's ski lord. Apparently a more noble label than that of the "King of the Monkeys", the day traders who, underlined in a tweet, "They are the owners of AMC, and I work for them".

And this is it the third novelty: the board, this time, is not the spectator of a battle between David and Goliath, but ours Aron is the general who leads the revolt against the managers, all downwards, to the point that, almost unique case, in fact, among the top twenty shareholders, there is not a single investment fund. A cunning general, who uses the weapons at his disposal with great malice. "Aron has no alternative - says one of the enemies, the manager Eric Hadler of Mkm - to keep close to the shareholders he has and add new ones". And so, in the midst of this mad rise, AMC invented the loyalty card for shareholders: just join the club to receive rich rewards. Starting from the bucket full of popcorn at the cinema, to continue with a series of free premieres. Little stuff, but still something for an audience that sees very little "free" stuff. 

It's a crazy strategy, so crazy that, at least for now it has worked by devastating not only the coffers of various Wall Street firms but also the balances of the ETFs invested in theRussell 2000 index, the one dedicated to medium and small businesses where both Amc and Game Stop appear. Meanwhile, the people of day traders who communicate via Reddit have filled the sites of the most skeptical analysts with insults and threats who have received cartoons in which the experts, doubled over, suffer the law of the ape behind their backs.

Aron, of course, does not approve of certain methods. But just to show which side he's on, he has approved a bequest of 50 dollars to the foundation "for the mountain gorilla defense”. Meanwhile, he develops his battle plan. Analysts suggest that he lower his debts and close some of the theaters because he will not be able to earn more than $330 per cinema (pre-pandemic average) or increase sales of soft drinks and sandwiches ($6 per viewer).

He does the exact opposite. The money flowing into the group's coffers will be used for new acquisitions. His Achilles heel? That of each Ponzi scheme. Sooner or later the shareholders will stop buying, rather they will sell to collect the rich capital gain. And it won't be possible to meet the demands But, Aron hopes, that moment has not yet arrived and perhaps it will never arrive if, in the unlikely event, the chain becomes important enough to establish itself at the Majors.

And meanwhile, in homage to the old rule that a large debtor is stronger than a small one, the manager has built a war machine that will not be easy to disassemble: a stock market value of about 29 billion dollars held by 3,2 million aggressive shareholders, an expression of that anarcho-shareholdersism that is beginning to scare Big Business America. Dodgecoin flies, the virtual currency which, according to his admirer Elon Musk, "is nothing but a scam". At the end of the month we announce theRobin Hood hypo, the zero commission platform favored by small speculators, i.e. the monkeys who dance at the feet of the Gorilla.