- AMC shares surged as much as 23% on Tuesday after the company raised $230.5 million in a sale of new stock.
- The spike adds to AMC's 116% gain last week as Reddit traders banded together to execute another squeeze on short positions.
- Investment firm Mudrick Capital will receive 8.5 million Class A shares in exchange for paying $27.12 per share.
- See more stories on Insider's business page.
AMC shares soared as much as 23% on Tuesday after the company raised $230.5 million in a sale of new stock, adding to last week's retail-fueled surge.
Mudrick Capital Management agreed to buy 8.5 million shares for $27.12 apiece, a premium to the stock's $26.12 Friday close.
The news comes on the heels of a 116% surge for AMC last week as retail traders active on Reddit and Twitter banded together to squeeze short positions, pushing the stock even higher in the process.
AMC's share rally was originally catalyzed by major shareholder Dalian Wanda Group selling almost all of the remainder of its stake in the company. Redditors responded by cheering the newly available shares and making their newfound weight felt in the market.
AMC led a broader rally in so-called meme stocks last week that also included GameStop and Virgin Galactic. Short-sellers wound up losing nearly $3 billion betting against those three stocks alone, according to financial-analysis firm Ortex.
The movie-theater chain's business was hit hard by the COVID-19 pandemic as it was forced to close locations worldwide to help curb the spread of the disease. The company said Tuesday the cash proceeds from the Mudrick share sale primarily will be used to acquire more theatre leases and used for investments to enhance the consumer appeal of its current theatres.
"Given our scale, experience and commitment to innovation and excellence, AMC is being presented with highly attractive theatre acquisition opportunities," said AMC CEO Adam Aron in a statement. "We are in discussions, for example, with multiple landlords of superb theatres formerly operated by Arclight Cinemas and Pacific Theatres,"
Last month, Decurion Corp. decided to shut down its roughly 300 movie houses, including the famed Cinerama Dome on Sunset Boulevard in Los Angeles that first opened in 1963.
"With this agreement with Mudrick Capital, we have raised funds that will allow us to be aggressive in going after the most valuable theatre assets, as well as to make other strategic investments in our business and to pursue deleveraging opportunities," Aron said.
The company also aims to continue exploring ways to deleverage. "With our increased liquidity, an increasingly vaccinated population and the imminent release of blockbuster new movie titles, it is time for AMC to go on the offense again," said the statement.
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