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The rally calmed down on Friday night after AMC shares climbed 38% during morning trading. Shares closed at $ 26.12 per share on Friday, down from $ 13.68 on Monday. At its peak, the stock reached $ 36.72 per share.
AMC was by far the most active stock on the New York Stock Exchange on Friday, as more than 650 million shares changed hands. Its 30-day average trading volume is just over 100 million shares, according to FactSet.
With 450 million shares outstanding, the entire company changed hands almost 1.5 times during Friday’s trading day.
The so-called short cover could help AMC’s massive rally this week. The company has about 20% of its outstanding shares sold short, compared to an average of 5% short interest in a typical US stock, S3 Partners said.
When a strongly shorted stock climbs rapidly, short sellers are forced to buy back borrowed stocks to close their short position and reduce losses. Forced purchases tend to fuel the rally even more.
AMC’s new retail investors, who represent 3.2 million people, held about 80% of the company’s 450 million outstanding shares as of March 11, AMC reported earlier this month. Their efforts, which surged in January, pushed the stock to $ 20 per share, from $ 5, and helped AMC reduce its debt by about $ 600 million.
The more than 1,100% jump in AMC shares since January has defied the forecasts of Wall Street analysts. AMC’s business has been under extreme stress. He has about $ 5 billion in debt and has had to defer $ 450 million in lease repayments as his income has largely dried up during the ongoing coronavirus pandemic. Theaters were closed for several months to help stop the spread of the virus, and when the company reopened, few consumers felt comfortable attending screenings and movie studios withheld new releases. .
As film business rebounds, AMC continues to face strong headwinds. Although the company ended the first quarter with $ 1 billion in cash, the most it has ever had in its 100-year history, that money will only keep it afloat until 2022, unless that the public does not come back en masse to make up for months without income.
While initial box office revenue is promising, the fundamentals of the film business have changed over the past year, including theatrical capacity, release dates shared with streaming services, and the number days the films are shown.
“Whatever really matters here in the long run, this company is never going to make any money again,” Rich Greenfield, co-founder of LightShed Partners, said Friday morning on CNBC’s “Squawk Box.” “They will never generate cash with their current capital structure. It was trading at seven times EBITDA before the pandemic. It is now trading at 25 times EBITDA right now and it is worse off today with the changing industry. It defies all logic. “
As of the last day of 2019, AMC had a market value of $ 751.87 million. That value stood at around $ 11.9 billion on Friday, according to FactSet data.
– CNBC Yun Li contributed to this report.