Metal

AMC just bought a stake in a gold mine in a meme-ified push to diversify beyond movie theaters

Wednesday, March 16, 2022 by Snacks

Grab the popcorn… There’s a plot twist in AMC’s stock saga. The struggling theater chain has bought a 22% stake in a gold mine for $28M. FYI, the Nevada mine, Hycroft, went public through a SPAC in 2020 after financial trouble and bankruptcy. AMC stock rose 6%, and the Nevada mine, Hycroft, jumped 19% yesterday on news of the odd-coupling:

  • Making its case: AMC’s CEO compared Hycroft to AMC last year, saying the deal would help Hycroft solve its “severe and immediate liquidity issue.”
  • Staying viral: AMC’s “bold diversification move” (CEO’s words) could be a push to capture investor interest now that shares have nearly fallen to pre-2021 levels.

Roller coasters… Last year, AMC shares popped 12X and GameStop shares spiked 7X thanks partly to an influx of retail investors. Both companies used their juiced-up market caps to raise cash.

  • Step 1: Go to the market. AMC and GameStop each raised $1.6B+ via at-the-market (ATM) offerings last year. ATM offerings have become popular with some companies like Tesla and Hertz because they let them issue shares at (high) market prices, not (potentially lower) prices negotiated by institutional investors.
  • Step 2: Go shopping. AMC and GameStop have used that $$ to pay debts, invest in new crypto products, and — now — buy a gold mine.
THE TAKEAWAY

AMC’s already converted some buzz into cash… Now it’s using that cash in even more experimental ways — e.g., acting kind of like a holding company. But it’s a long way from AMC’s core biz: movies, getting people to buy popcorn, and see them again. As for Hycroft, the mine’s looking to raise $500M through an ATM offering. TBD if that’ll work.

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