GameStop's Revival? AMC Surges Over 50% Intraday (Comprehensive)

Impact of 'Short Covering' on the Rise Background
Up 110% in One Week

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Suhwan] The stock price of AMC, a US movie theater chain that surged during the GameStop saga last January and is known as a 'Meme Stock,' has surged again.

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

This represents a 110% increase compared to the 21st, just a week ago, and surpasses the previous high of $19.90 during the GameStop saga in January.

Analysis suggests that the sharp rise in AMC's stock price on this day is due to 'Short Covering.' This refers to short sellers, who bet on a stock price decline, buying back shares to close their positions and minimize losses when the stock price rises contrary to their expectations. 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 US companies.

CNBC reported, "As AMC's stock price has recently been on the rise, short sellers are anticipating large losses," and "Their buying back of shares appears to have caused the stock price to surge." It was revealed that short sellers of AMC suffered approximately $1.3 billion in losses just this week.

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

[Image source=Reuters Yonhap News]

Following the success of this large-scale paid-in capital increase, many individual investors, including users from the US Reddit community WallStreetBets that triggered the GameStop saga, began to expect growth potential from 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 phrase wishing for a sharp rise) and "I put all my assets into AMC. Wish me luck."

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

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

There are forecasts that AMC will undertake additional paid-in capital increases to reduce its current debt scale, which amounts to $10 billion. Previously, AMC stated, "We will consider a paid-in capital increase if we deem it necessary."

However, there are also claims that AMC's future growth potential is 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.

Analyst Eric World said, "As AMC is pushing for profitability recovery, the reopening of theaters in New York and California is expected to be a critical turning point."

AMC's first-quarter earnings report showed that sales fell by 84% compared to the same period last year.

This content was produced with the assistance of AI translation services.