'Meme Stock' Rally Rescues AMC Theaters From $600 Million Debt (polygon.com) 75
This week's bizarre "meme stock" rally, which has delivered lottery-like windfalls for holders of GameStop stock, also wiped out $600 million in debt owed by the AMC theater chain. Polygon reports: That's because, on Wednesday, a private equity firm named Silver Lake -- and private equity firms are popularly considered the "bad guys" in this snobs-versus-slobs drama -- elected to convert the corporate bonds it held into AMC Entertainment Holdings stock. Although the theater chain's stock price has tumbled and soared since the move, the debt relief is permanent. Just Monday, AMC was warning investors that "there is substantial doubt about our ability to continue as a going concern."
Wiping out more than half-a-billion dollars in debt, though, should take a lot of pressure off AMC in the short term. "A week ago, it was not crazy to think this company was doomed," Bloomberg's Matt Levine wrote on Thursday. "Now it is entirely possible that it will survive and thrive and show movies in movie theaters for decades to come because everyone went nuts and bought meme stocks this week."
Yet, by converting their AMC debt holding to AMC stock, the Silver Lake equity firm has gotten hurt by a falling stock price, too. The conversion price for the bonds Silver Lake held was $13.51; Silver Lake cashed in on Wednesday, when AMC's shares ended the day at $19.90, more than 400% better than the day before. Smart move, right? Well, AMC's share price at publication time Friday was about $15 -- but it closed Thursday at $8.63. So, unless Silver Lake found some other sucker to buy the stock before it bottomed out, they've been riding a roller coaster that at best has them about 5% to 7% ahead of their original position, with no guarantee of staying there.
Wiping out more than half-a-billion dollars in debt, though, should take a lot of pressure off AMC in the short term. "A week ago, it was not crazy to think this company was doomed," Bloomberg's Matt Levine wrote on Thursday. "Now it is entirely possible that it will survive and thrive and show movies in movie theaters for decades to come because everyone went nuts and bought meme stocks this week."
Yet, by converting their AMC debt holding to AMC stock, the Silver Lake equity firm has gotten hurt by a falling stock price, too. The conversion price for the bonds Silver Lake held was $13.51; Silver Lake cashed in on Wednesday, when AMC's shares ended the day at $19.90, more than 400% better than the day before. Smart move, right? Well, AMC's share price at publication time Friday was about $15 -- but it closed Thursday at $8.63. So, unless Silver Lake found some other sucker to buy the stock before it bottomed out, they've been riding a roller coaster that at best has them about 5% to 7% ahead of their original position, with no guarantee of staying there.
The difference from a real rollercoaster (Score:5, Insightful)
Is you tell your broker to cash out any time the rollercoaster goes above a certain height. You can have zero idea how low and high a stock will go, but if you're confident it will swing back and forth long enough for you to sell then you can make money.
Re: The difference from a real rollercoaster (Score:2)
The other difference is that by getting all that debt paid off, and becoming a more viable business, the stock may well go higher now.
Disclaimer - I have a whole 4 AMC stocks that I bought to enjoy the rollercoaster!
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The AMC thing is huge, a huge deal for them and a huge surprise for everyone. Getting debt and interest payments off the books is a shot in the arm for them. It's a real second chance for their business and I hope they make the most of this opportunity, it's like winning the lottery.
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And at least AMC employs people, even if they don't pay much. Those hedge funds that are paying for all this are just a bunch of rich arseholes who tried to cheat the system as soon as they began to lose.
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I was going to say, of all the corporations that could have become accidental beneficiaries of the short squeeze, this one is pretty innocuous. They have been (and continue to be) slapped around by the pandemic, and all this does is keep them from bleeding out a little while longer. If that means we have movie theaters to visit in a year, that's a side effect I can live with.
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Yes, it's so great that the entertainment cartel will be able to continue to force its outdated and inconvenient business model of delaying streaming releases until new movies have had their initial run in a cinema. GameStop may also be a relic of earlier times, but at least there's no bullshit gaming industry scheme which forces games to be released in retail stores before they're available to download on Steam. Hell, if that kind of protection racket existed for GameStop, they'd probably be doing just f
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That aspect has more to do with studios and the film copyright holders than it does with theaters. Collectively the theaters negotiate to try and get the best deal for their business. But ultimately they are at the mercy of what the biggest film studios decide.
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I have a whole 4 AMC stocks that I bought to enjoy the rollercoaster!
I recently purchased 1 art. Would you be interested in trading your 4 AMC for my 1 art?
How many... (Score:2)
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The other difference is that by getting all that debt paid off, and becoming a more viable business, the stock may well go higher
It makes AMC more viable, so the stock will likely end up higher in long run than before the fun. However selling a pile of stock won't help with squeezing the shorters.
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Is you tell your broker to cash out any time the rollercoaster goes above a certain height. You can have zero idea how low and high a stock will go, but if you're confident it will swing back and forth long enough for you to sell then you can make money.
This is actually an interesting case where the debt holders (Silver Lake) took advantage of such a swing. They were receiving just under 3% in interest [businesswire.com], with the right to convert into equity, which in this case is turning out pretty valuable. Even if AMC goes bankrupt (and they may, because they still have at $10B in other debt and not a lot of income), Silver Lake will likely have been able to sell at least some of that equity for cash, rather than watching all 600MM dwindle to 0.
In contrast, institutio
The stock market is now officially a joke. (Score:4, Insightful)
I mean to anyone who knew what was going on, it always was. But now it's official. :)
Re:The stock market is now officially a joke. (Score:5, Insightful)
No, they made shorting a stock a lot more risky.
Good.
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Yeah, actually some are. You would have been in a better position to do so this time last week.
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Are the hedge fund houses publicly traded? Can we short THEIR stock?
I can't help but feel like you might have missed the lesson here
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Amen. It's a bit crazy that the hedge funds would go nuts shorting like they did on Gamestop. You'd think they'd be worried a rival fund would take them out.
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This. It took only 20 years for us to learn that.
Shorting isn't new. I briefly worked in a stock trading company 20 years ago, and it was at that time that a guy from the USA branch came over to tell us that all the cool boys trade shorts these days because that's fast money.
20 years ago.
You can imagine I wasn't surprised in the least by the financial crisis. It was always coming, the only question was when and in which dress. That it was the mortgage market I didn't predict because I hadn't been following
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We will get these people to stop when they see their ex friend as an ex billionaire crying on TV
Nah. We will get these people to stop by bancrupting them and destroying their business model. At least that's what I am hoping for.
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The lesson here isn't even "don't short", it's "don't short yourself into a corner" which is what happens when you take so much that the remainder is a club that can be used against you. If they hadn't been so damn greedy and shorted to about half the degree that they did, there would have been far too many shares to buy up. The maximum win gets smaller, but they are no longer vulnerable to having the table flipped on them in the middle of the game.
I think that's the change you're going to see out of this -
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If they hadn't been so damn greedy and shorted to about half the degree that they did, there would have been far too many shares to buy up.
There also wouldn't have been enough pressure on the stock price to virtually guarantee the profit.
This game is not one of "we gamble on the stock price". The game is "we throw so much money at the problem that we can turn the stock price". That game is up now.
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What you're really doing with stocks is buying a part of a company, and there are certainly business where it is no joke to be part owner of. The fact there's some crazy gambling in the corner going on really
Re:Who cares (Score:5, Insightful)
What is with all this financial bullshit stories? Where are all the covid and political crap you fuckers spewed when trump was in power? All of the sudden all that shit has disappeared from slashdot and other outlets. Right after the election too. So transparent
Do you really want to hear about Covid? I don't.
I'm glad they've found something else to talk about other than Covid and Trump.
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What is with all this financial bullshit stories? Where are all the covid and political crap you fuckers spewed when trump was in power? All of the sudden all that shit has disappeared from slashdot and other outlets. Right after the election too. So transparent
Do you really want to hear about Covid? I don't.
I'm glad they've found something else to talk about other than Covid and Trump.
So long as the stories about how the con artist was recruited to be a Russian asset [theguardian.com], and he did their bidding, there will be a lot of talking to do.
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Yeah, we can tell you're super duper concerned about foreign influence, just like you were when China bought the Bidens, China embedded a spy to suck off Swalwell, China planted a driver on Feinstein for a decade that she somehow didn't notice or Russia gave the Clintons a million dollar 'birthday gift'. So, so concerned.
So whaty is your point? Seems like you are saying that the Bidens are exactly the same thing as your lord Trump.
That's the problem with you idiots that uses whataboutism. You logic is so flawed, that you are arguing the exact opposite of what you think you are.
Which is why I know you are wither a bot or a maga, probably the maga because You aren't too bright. By the way - where were you on the 6th of January - asking for some friends.
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I'm glad they've found something else to talk about other than Covid and Trump.
Speaking of Trump - he recently said that one blessing about now being out of office is he's finally got enough time to go golfing regularly.
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I'm glad they've found something else to talk about other than Covid and Trump.
Sure feels good to not hear about him much lately.
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It’s like being treated for a hit and run by a street bum ex-used car salesman high on bath salts who thinks the answer is a rusty fetid orange shoved in your face,
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What the heck are you talking about? The local TV news shows have a regular segment devoted to COVID coverage, and here in Los Angeles, they regularly broadcast the county health department's press conferences. As to the political crap, your hero packed all that up and took it with him when he fled DC in disgrace.
But maybe you're talking about CNN and MSNBC. They're just too exhausted from their respective four-year-long orgasms of outrage to keep going. They'll be back after their naps.
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Re: Who cares (Score:2)
Itâ(TM)s disappearing because the actual stories are disappearing. No one is making ridiculous decisions any more. No one is sat in the whitehouse telling you itâ(TM)s not dangerous and you shouldnâ(TM)t wear a mask. No one is lying about how many vaccines are being given out. No one has fumbled the logistics.
Instead, thereâ(TM)s a concerted effort to sort out the logistics that the last administration screwed up (or simply didnâ(TM)t bother to set up), and some progress being m
Re: Who cares (Score:2)
But to the orig
I was wrong on one thing (Score:5, Interesting)
I was asked this week how I thought the meme trading would affect the actual businesses. I said it basically wouldn't. This was all happening in the stock market outside of the actual businesses.
I was clearly wrong. I did not see this coming. .
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No, you weren't wrong, the story is bullshit.
THe company is going to go bankrupt. That hasn't changed. This was not a loan that got paid off, which is what they write the story to sound like.
A major holder of AMC's junk bonds converted their bonds to equity. That means when they file bankruptcy and reorganize, they're still out the $600M in equity, and their creditors lose $600 less. They can't issue new bonds anyway, because they're failing in the market. If it was a loan they got out of, their cash flow w
Re:I was wrong on one thing (Score:4)
The CFO is going to have stories for the grandkids, though.
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I wonder what they will do now. This cash doesn't change the fact that people are not going to the cinema due to the pandemic, and after things get back to some kind of normality there is a good chance that the landscape for movie releases has changed forever with home streaming getting a massive boost this year.
Seems like if they want to survive they have to take this opportunity to change direction and reinvent their business.
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That means when they file bankruptcy and reorganize, they're still out the $600M in equity, and their creditors lose $600 less.
The point is that they no longer owe someone $600m.
The equity is at this point pretty irrelevant. Either the company has a future or it doesn't, and improving their debt position by $600m increases its chances.
They're not "out" the equity anyway. The other shareholders suffer a loss in their own shares' value due to the dilution but gain value due to the improved financials of the company. The potential dilution would have been known and would have been priced in anyway.
So the company is in a clearly better
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You ignored the substantive part of every point you attempted to reply to.
Are you stupid? Or just really bad at communication? (Honest question)
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That's odd. You posted utter bollocks and I pointed this out. I don't need to take your idiocy apart word by word, I provided quite enough context to demonstrate that the part I quoted was talking nonsense.
Maybe I am bad at communication. I'm not used to trying to dumb things down so fucking far that even you can understand them.
Silver Lake (Score:2)
Silver Lake was one of the big partners in taking Dell private. I'm sure they know what they're doing, but even if they didn't dump the stock immediately, losing a few hundred million won't be a disaster for them.
Uh, what? (Score:1)
Sorry, you don't get paid for making up a new name for things. (although, you can apparently make a ton of money on Youtube even if you're a clueless idiot, influencing other clueless idiots. Strange times).
Silver lake shorted first then converted (Score:3)
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Or they may have just seen a chance to trade $600m of debt that was starting to get stinky into stocks they could quickly offload.
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It's not really unjust, it's a stupid game. And you know what you win for those....
Investing is buying stock, bonds, whatever, in companies you expect to generate value. It's a positive sum game, with the expected positive return. "Trading", i.e. buying stocks, shorts, etc. for a fairly short term turnaround is pretty much a zero sum game. You might win, but only at the expense of someone else. If you keep doing it long enough (and don't go bust), you'll come out right where you would have been had you just
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Are you under the impression that "not unjust" means "justified?"
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Farmers are not shorting their sales. They are signing a contract to deliver specific amount of goods for a specific price in future. The only farmer's risk is their ability to manufacture those goods. Not their ability to find other seller who will sell same stuff at lower price at the time of delivery.
If market participant's profit relies on price for stock to go down, they are speculating. It got nothing to do with risk reduction. You should not be comparing them to farmers. They might be on same market,
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It's kinda cool, (Score:2)
that a bunch of Redditors could upset the apple cart to this extent. But it does point out, yet again, how utterly arbitrary, un-objective, and bullshit-ridden the stock market is. The fact that there's such a thing as a "unicorn IPO" tells you everything you need to know about the magical thinking involved.
China owns AMC (Score:2)
Re:China owns AMC (Score:5, Insightful)
> Just so you know... its not obvious.
Yeah, the owner of Wanda has a controlling interest on the board and is a member of the CCP.
These people are taking their 'stimulus check' and using it to pay off debt of a CCP-linked company. Great Americans!
No airline bailout (Score:2)
"meme stocks" (Score:3)
All stocks are meme stocks. It's just that some of the memes appear in the Wall Street Journal and on CNBC.
Private equity (Score:5, Informative)
on Wednesday, a private equity firm named Silver Lake -- and private equity firms are popularly considered the "bad guys" in this snobs-versus-slobs drama
Having worked with private equity firms, I do consider them the bad guys, in many ways. If one ever buys your company, start looking for a new job because nothing will get better.
Sounds like a very good move to me. (Score:5, Insightful)
Yet, by converting their AMC debt holding to AMC stock, the Silver Lake equity firm has gotten hurt by a falling stock price, too. ... unless Silver Lake found some other sucker to buy the stock before it bottomed out, they've been riding a roller coaster that at best has them about 5% to 7% ahead of their original position, with no guarantee of staying there.
Only a 5% to 7% profit and maybe a small loss? Sounds a LOT better than riding the bonds down into bankruptcy and losing about 100%.
If bailing out this way saves their invested principal AND saves the company it's a double win.
This reminds me of a story told by a venture capital type, back when I was first-hire at a startup working on going public: (If I recall correctly) he had bought something like 100,000 shares of a startup at $1. The stock bubbled up to just under $198 - making him almost 20 paper millions - then tanked down again and he finally unloaded at $2. "What a stressful way to double your money!"
Good and bad news. (Score:1)
Video games saved the movie star? (Score:1)