Private equity firm Silver Lake acted like a thug this week, hitching a ride in the stock market frenzy fueled in recent weeks by users of a Reddit message board.
Silver Lake managed to make a profit of around $ 112 million on Wednesday by selling 44.4 million newly minted shares in the chain operator AMC Entertainment Holdings Inc. AMC,
in a glowing market for the company’s stock, according to a Friday filing with the Securities and Exchange Commission.
The private equity firm based in Menlo Park, Calif., Gained its fortune after individual traders, meeting in an online trading forum, dramatically raised the price of AMC’s stock, along with GameStop Corp. GME,
and a handful of other companies that have become popular targets for professional short sellers.
Read: AMC stock trading frenzy may avoid bankruptcy, but the cinema operator still faces years of recovery
Silver Lake secured its new shares on Wednesday by converting into equity nearly $ 600 million in AMC debts it owned that were issued in July, when the film network rushed to borrow to support the financing, as its cinemas remained largely closed and their shares traded at close to $ 4 per share, according to FactSet data.
By selling the new shares on Wednesday, the same day it converted the debt, Silver Lake prevented a major decline in shares on Thursday as the Robinhood mobile trading app prevented users from trading in AMC shares and other companies.
Companies issue convertible debt as a way to raise money, even when the “strike price” or the share conversion price may seem very out of reach. AMC had $ 3 billion in convertible bonds outstanding on Friday, with a sizable portion at an exercise price of $ 18.95, according to FactSet.
Read: Wall Street seeks ways to avoid the Reddit stampede of day traders as a ‘force to be reckoned with’
The recent short-distance fight was framed as a dispute between Wall Street and Main Street at a time when the pandemic exacerbated the divide between rich and poor in America, and trillions of dollars of fiscal and monetary stimulus spread across the financial markets. But Silver Lake’s score underscores how big pro players are making big gains on the same Wall Street bets as day traders.
Read: GameStop and AMC drama does not stop with the stock market
“What do you expect them to do?” said Marty Fridson, chief investment officer at Lehmann Livian Fridson Advisors, referring to the big institutional actors who are taking advantage of the recent speculative stock prices. “It’s not like the big financial players feel any sense of solidarity.”
“For me, this whole ‘populist’ thing is really a show apart,” said Fridson, a veteran of the junk bond or high-yield market.
Watch: GameStop frenzy puts clearinghouses in the spotlight as investors assess systemic risk fears
AMC closed 53.7% on Friday at $ 13.26 per share, and is 525.5% up on the year so far, according to data from FactSet.
The broader stock market plummeted on Friday, with the Dow Jones Industrial Average DJIA, the S&P 500 SPX index and the Nasdaq Composite Index COMP, each registering a drop of more than 3% weekly amid volatility in a handful high-profile actions.
Silver Lake did not respond to a request for comment on Friday.