This week Silver Lake, which is a private equity firm, sold its AMC Entertainment Holdings stake for $713 million. Traders organized a rally on social media platforms such as Reddit and others leading to a ten-fold increase in its price share.
AMC shares had dropped to a low $2.12 per share, a 70% drop, at the end of last year as movie theaters were operating at reduced capacities or were closed for several weeks at a time due to lockdowns that were the norm after the coronavirus swept across the world.
On Wednesday traders targeted hugely shorted stocks including AMC and GameStop Corp. and the share price rose to $19.90. Regulatory filings show that Silver Lake sold its entire stake in AMC that day on many open market transactions.
This sale put Silver Lake and its investing partners back in the black. In 2018 the buyout company had made a $600 million convertible bond investment in AMC. It was a part of the debt restructuring deal the company had made with AMC. This deal helped AMC, the world’s largest movie chain, to avoid bankruptcy. Many retailers were not as fortunate when the pandemic shut down innumerable brick and mortar stores.
Silver Lake converted the $600 million worth bonds to shares and sold them in the open market for a profit thanks to the social media rally which pushed AMC shares above the bond’s initial value.
There has been a social media rally on shorted stocks that has been unlike any other in the past, this week. Ontario Teachers’ Pension Plan was another company that benefited in this week when it sold $497.4 million worth of stock of U.S. shopping mall owner and operator Maserich Co. that was in its possession, as per regulatory filings.
AMC itself has also benefited by the rally. It could get $304.8 million as it sold shares this week. The company which had a dismal outlook on its future just a short while ago is now looking at innovative methods to raise capital by selling stocks as per reports received from sources by Reuters, a couple of days ago.