Two leading international cinema chains’ stock market value has risen dramatically during a recent short squeeze on stocks that typically have low value, after coordinated efforts on the social news and discussion website Reddit.
Stock value rises for AMC
The stock market value of AMC Entertainment Holdings Inc on Wall Street’s New York Stock Exchange recently rose from $5 a share on Tuesday, January 26th, to $19.90 a share by the next day.
The US-based enterprise owns the AMC Theatre chain. Operating 978 individual cinemas around the world, AMC is currently the largest international cinema chain in terms of how many venues it operates. It also owns the Odeon Cinemas Group, the largest cinema chain operating throughout Europe, which has more than 360 cinemas, 120 of which are located here in the United Kingdom.
Silver Lake, the global private equity firm that invests in technology enabled industries, lessened the debt load of AMC by changing a bond valued at $600 million into stock. Back in 2018, the equity firm put $600 million into AMC via a debt offering and assisted the exhibitor through a renegotiation of terms in 2020.
Cineworld shares also climb
Cineworld Group, based here in the UK, has also seen its shares rise, climbing from £63.84 a share at 2.30pm on Monday, January 25th to £85.26 at 9.30am on Wednesday, January 27th.
The sharp share price increases, sometimes referred to as a short squeeze, are the result of amateur stock buyers and individual investors who frequent a message board group on Reddit, known as “r/wallstreetbets”.
The individuals involved purchased stock in a response to short selling activities of hedge funds. Short selling involves traders borrowing stock they anticipate will fall in value, selling it quickly and then rebuying it at a lower price after it has dropped in order to make profits.
Cinema chain shares have decreased substantially in value since March 2020 when the COVID-19 outbreak began, and Wall Street traders have anticipated that this decline will carry on during the continual lockdowns. However, the recent activities of the individuals on Reddit have effectively incited a reversal of this trend.
There are many individual stock buyers, as well as those involved in the movement led by the Reddit groups, who regard the recent action as a natural rebellion against the hedge fund’s market control and an act of retribution for the financial crash of 2008.
The recent market turbulence follows Cineworld shareholders approving a new incentive plan for its two CEOs based on the UK cinema company’s market performance. The plan states that if Cineworld shares hit the price they held prior to the pandemic within the next three years, the two CEOs will each receive shares valued at least around £33 million.
Cineworld confirmed that 70.15 percent of shareholder votes favoured the newly drawn up policy. Additionally, votes were also made in favour of incentives for Cineworld’s head of finance and other executives. However, on account of the pandemic, all of Cineworld’s venues based in the UK are currently closed.