AMC Raised $1 Billion From Meme Stock Mania. Why Didn’t GameStop Even Try?
The struggling video game retailer chose not to exploit an irrational market. Bad move.
With the stocks of GameStop, AMC, Nokia and others tumbling back to reality — down some 65% from their recent highs — it probably won’t be long before the Great Meme Stock War is over. But regardless, we already know who the big winner was: struggling theater chain AMC, which six weeks ago looked like it might be headed out of business and now has a realistic chance of making it until the pandemic ends. By contrast, GameStop — the true darling of meme stock investors — seems to be in little better shape than it was at the start of the year, despite having its stock jump from about $19 a share at the end of 2020 to as high as $480 a share last week. And the reason for this is simple: AMC cashed in on meme stock mania. GameStop, mysteriously, did not.
The math here isn’t that complicated: When a company’s stock price soars, it effectively means that investors are throwing free money at it. AMC, quite sensibly, decided to take that money, by doing what’s called an at-the-market offering of shares in the company. That meant it issued 50 million new shares of stock, and told its bankers to sell them on the open market (rather than placing them privately with big buyers). That allowed AMC to act quickly, and in combination with an earlier share offering that hadn’t been completed, it raised more than $300 million in January from share sales.
On top of that, AMC also effectively had $600 million of its debt wiped out when one of its biggest convertible-debt holders, Silver Lake, converted all that debt into AMC shares and then quickly sold them, clearing more than $100 million for itself in the process. Put all that together, and add in some new debt that AMC was able to sell to big investors, and the company has raised more than $1 billion in cash over the past few weeks. And it did so without even doing an especially good job of timing its trades; the average sale price for the shares it sold was $4.81 a share, nowhere near the $20.36 a share it hit at the peak of the meme stock frenzy last month.