Jun 1, 2021 - Economy

AMC and Mudrick time the market to perfection

Data: YCharts; Chart: Axios Visuals

An early contender for trade of the month comes from meme stock (and movie theater chain) AMC, which sold 8.5 million shares over the long weekend to hedge fund Mudrick Capital Management for $230 million.

Driving the news: The price per share was $27.12, a 3.8% premium to Friday’s closing price. The news caused AMC shares to spike in early trade on Tuesday, allowing Mudrick to then reportedly exit at a substantial profit.

Flasback: AMC previously took advantage of its meme-stock status in January, when it issued $506 million in new equity capital, as well as retired hundreds of millions of dollars in debt.

  • Back then, Silver Lake converted its debt into equity at what felt like the insanely high price of $13.51 per share, then immediately turned around and sold at an average price of $16.05 per share — an overnight profit of $113 million.
  • This time around, it's not known exactly where Mudrick sold, but AMC's volume-weighted average price was $30.86. If Mudrick got that much on average for its shares, it would have made a profit of about $32 million in just one day.

The big picture: Meme stocks make for great gambling vehicles, but all too often the companies themselves see very little benefit from their shares' volatility. AMC has proved itself expert at using its high share price to significantly strengthen its balance sheet — while also allowing sophisticated momentum traders to make millions of dollars in meme profits.

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