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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
We are so back. That was the message meme stock investor “Roaring Kitty”, aka Keith Gill, tweeted on Sunday May 11. After a lengthy hiatus, the subsequent series of videos and images added up to coded, if not indecipherable, communication.
No prizes for guessing what followed. Shares of GameStop, the otherwise ordinary retailer that became meme stock fodder in 2021, more than tripled over Monday and Tuesday.
More interestingly, AMC Entertainment shares jumped from just $3 each to around $10. The cinema chain has struggled mightily post-pandemic. But it has also leaned into the meme stock phenomenon, creating the “Ape” avatar as its community symbol.
Most AMC observers are well aware that the company is headed for a major debt restructuring that will probably wipe out most of its existing equity value. Its share price peaked in 2021 at around $230. The face value of debt and lease obligations total more than $8bn. Last week its market cap was under $1bn. Trade publications have reported that creditors are beginning to organise as the company approaches a mountainous $3bn of maturities in 2026.
But why worry? AMC has been able to sell $3bn of stock since the start of 2021. That includes $250mn on Tuesday for $3.45 per share amid the irrational rally. At some point soon the music will stop, leaving AMC stranded. By then the story should not relate to any bankruptcy filing but why retail investors willingly ploughed in their own cash to forestall it for so long.
Meme stocks have begun to be understood as fundamentally a community. Any kinship formed apparently outweighs the near certainty of losing money. AMC, like some casino manager offering complimentary hotel rooms and buffet dinners for high rollers, created events to hook stock buyers.
The company’s actual securities filings are, unsurprisingly, far more sober. AMC wrote recently in its annual report that its “cash burn rates are not sustainable long-term” and that its only hope is for box office receipts to return to 2019 levels. This is unlikely. In 2023, total industry revenues were down more than 20 per cent from five years ago.
AMC lenders and bondholders will benefit from the cash raised from retail investors activated by social media output. But at some point they are going to want to be treated like the future owners of the business. These investors are far less solicitous than Roaring Kitty’s minions.
