UPDATE: Private equity firm Silver Lake, which has been a major stakeholder in AMC Entertainment in recent years, has sold its entire position in the largest movie theater chain after a dramatic increase in its shares.
In a filing with the SEC after the deal closed, AMC said Silver Lake sold shares between $ 14 and $ 24 per share, often the price when it was traded three days ago. AMC shares, which saw a massive influx of individual investment along with GameStop, shot up nearly 300% for the week, ending today’s session at $ 13.19.
Silver Lake, whose media investments also include a significant stake in Endeavor, converted $ 600 million of AMC’s debt into shares and then sold the shares on the open market at a considerable profit. Another AMC financier, the Wanda Group of China, had reduced its stake in 2018, with Silver Lake taking over $ 600 million in convertible notes.
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The shares of AMC Entertainment, the main exhibitor, rose 53% with the big turnover, while a betting frenzy of individual traders joining online ended a week of destruction on Wall Street.
The spike left AMC shares at $ 13.19 over the weekend, almost three times where they were a week ago. This erased the decline of the cinema chain and a list of other besieged companies led by retailer GameStop, after several online brokers restricted negotiations.
While the financial system was looking for solutions – and some investors filed class actions against online companies like Robinhood for blocking deals – AMC was considering its options. Several press reports said the company was considering another share sale to turn the momentum of the shares in its favor. The company did not respond to Deadline’s request for comment.
Having managed to avoid bankruptcy during the 100-year catastrophe of Covid-19, the cinema chain achieved the much-needed relief due to the increase in shares on Wednesday. The company converted $ 600 million into equity debt, selling shares to one of its main financiers, the private equity firm Silver Lake Group.
The role of individual Reddit-based investors in the stock market has sparked a heated debate over speculation and whether Wall Street should be the territory of so-called “professionals”, as opposed to this new generation of brokers. The power of these poorly organized groups was seen as several online trading platforms eased restrictions against certain stocks. Money flowed back as retail investors sought to continue to put pressure on hedge funds and others betting that certain stocks would fall. GameStop soared to $ 325 per share today, with turnover twice that of normal. The stock started in 2021 at $ 17.52.
The SEC responded to the furor over volatile market action by saying it will investigate, although today’s statement was largely a collection of platitudes. “We will act to protect retail investors when the facts demonstrate abusive or manipulative commercial activity prohibited by federal securities laws,” said the regulator.
While some stocks were thriving, the Dow Jones Industrial Average, Nasdaq and S&P 500 fell by more than 1% and almost all media and technology stocks ended in the red. The unstable moment for markets comes amid much greater uncertainty as investors struggle to predict when coronavirus vaccines will spur economic recovery and whether Federal Reserve policy will help or harm it.
In yet another turnaround in the AMC saga, the company, before the increase in its share price, announced a new round of financing and a total of more than $ 900 million in new cash raised since December. Declaring that “the sun is shining for AMC”, CEO Adam Aron said on Monday that the company would have enough liquidity to last until the second half of 2021, even if the marquees remained dark.
Eric Wold, a B Riley analyst who has an optimistic view of the exposure’s ability to recover after the pandemic, told Deadline he suspects that AMC will strongly consider profiting again in the race. Its shares, which were stagnant between $ 2 and $ 4 for most of last year, soared 300% to almost $ 20 on Wednesday. “I suspect they would like to have a little more cushion,” said Wold. “Why not take advantage of a price that is many times higher than before?”