When Hertz shares skyrocketed for no particular reason then known to investing man, it struck upon the not-at-all-unreasonable idea of selling a whole bunch of additional shares. If people were willing to snap up shares of a company mired in pandemic and bankruptcy regardless of what had previously been known as “fundamentals,” why should Hertz itself not benefit from the frenzy? The answer to that question turned out to be, “because the SEC says no.”
Perhaps mindful of this precedent, and mindful of being sued for selling something at prices the company itself maybe didn’t quite believe in, when GameStop shares skyrocketed for no particular reason understood to investing man, it demurred.
Both of these moves proved a mistake. Hertz’s shares were not worthless at all and may even have somehow been underpriced. And by the time GameStop worked up the courage of others’ convictions, its share price had dived to about a quarter of what it once changed hands for—but still less than half its present level.
Unlike its predecessor meme stocks, AMC Entertainment has neither shown reticence, nor had it imposed upon it. Nor has it been punished for this hubris in any meaningful way; instead, it is the doubters who have been burned. When AMC sold 8.5 million new shares to hedge fund Murdick Capital on Tuesday, the sort of dilutive move that generally dings a stock, particularly one trading nowhere near its fundamentals, whatever those are anymore, nothing happened.
Well, actually, three things happened: First, Murdick dumped all 8.5 million of those shares for a quick profit and, second, trashed the stock as overvalued—two things that, like diluting existing shareholders, tend to weigh on price. The third thing that happened was that, in spite of the above things, AMC shares doubled in value. And unlike, its fellow meme stocks unmoored from the things that used to matter, AMC isn’t shy about pressing its luck while, for legal reasons, pretending that those things might still matter.
AMC… filed with regulators to sell more than 11 million shares and warned against investing in its stock…. said, “Our current market prices reflect market and trading dynamics unrelated to our underlying business.”
It added that its share price might continue to experience extreme volatility that could cause losses for investors who buy the stock.
AMC’s filing drew comparisons with Hertz Global Holdings Inc.’s plan to sell as much as $500 million in shares last summer.
AMC and its shareholders should be so lucky, and so far, pretty much have.
AMC shares dropped as much as 40%, then later recovered all of those losses before sliding again.