GameStop's Return?... 'Meme Stock' AMC Surges Up to 58%

Published 28 May.2021 07:33(KST)

Closed 36% Higher Than Opening Price... Up 110% Over the Past Week
CNBC: "Short Covering by Short Sellers Caused the Stock Price Surge"

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Suhwan] The stock price of AMC, a U.S. movie theater chain that surged during the GameStop incident last January and is known as a so-called 'Meme Stock,' is rising sharply again.

On the 27th (local time) at the New York Stock Exchange, AMC's stock opened at $18.61 and closed the day up 36% at $26.52. During the session, it surged as much as 58%.

This marks a 110% increase compared to the 21st, just a week ago, and the stock price surpassed the previous high of $19.90 during the GameStop incident in January.

Analysis suggests that the sharp rise in AMC's stock price on this day is due to 'Short Covering.' This refers to investors who bet on a stock price decline (short sellers) buying back shares to close their positions in order to minimize losses when the stock price rises unexpectedly. According to data from S3 Partners, the short interest ratio of AMC stock currently stands at 20%, significantly exceeding the average short interest ratio of 5% for U.S. companies.

CNBC reported, "As AMC's stock price has been rising recently, short sellers are anticipating large losses," and "Their buying back of shares appears to have contributed to the sharp rise in the stock price." According to the media, short sellers of AMC have incurred losses amounting to approximately $1.3 billion just this week.

Earlier, AMC, facing a sharp increase in deficits due to the COVID-19 pandemic, conducted a paid-in capital increase exceeding $1 billion over the past few months to escape bankruptcy risk. This was the largest paid-in capital increase in AMC's history.

Following the success of this large-scale capital increase, many individual investors, including the U.S. Reddit community WallStreetBets that triggered the GameStop incident, began to expect growth potential for AMC, leading to a surge in stock purchases and driving the stock price rebound. In fact, on the WallStreetBets board that day, numerous posts appeared such as "AMC rocket" (a term wishing for a sharp rise) and "I put all my assets into AMC. Wish me luck."

[Image source=Reuters Yonhap News]

Bloomberg reported, "AMC's stock price is rising again as individual investors flock to it."

Chad Baynon, an analyst at Macquarie Securities, also said, "(AMC's rebound) means that the enthusiasm on Reddit still exerts influence," and analyzed, "The stock price rebound enabled AMC to conduct a capital increase, creating a mutually beneficial situation."

However, there are also claims that AMC's future growth prospects are not positive. The number of theatergoers has not recovered to pre-pandemic levels amid the ongoing COVID-19 pandemic, and the rapid rise of streaming services is expected to lead to a decline in audience numbers across the entire theater industry in the future.