Sat. Dec 4th, 2021

Shares of

AMC Entertainment Holdings Inc.

AMC 3.09%

surged as much as 38% in intraday trading Friday, extending a weeklong rally that has once again astounded analysts, enriched individual investors and punished Wall Street traders betting against the company.

The movie-theater chain company, whose stock closed last year just above $2, hovered around $27.25 in recent trading Friday, giving the shares a year-to-date gain of nearly 1,200% and lifting AMC’s market capitalization to more than $12 billion. The rally marks an astounding turnaround for a company that last year was reeling from the coronavirus pandemic and trying to stave off bankruptcy.

Once again fueling this week’s rise: enthusiastic individual investors who have banded together on Reddit’s WallStreetBets forum, in Discord chat rooms and in text chains with friends. Throughout the week, hashtags including #AMCSTRONG and #AMCSqueeze splashed across

Twitter,

with many predicting more gains ahead. Shares are up roughly 125% week-to-date, with Vanda Research’s VandaTrack estimating that individual investors poured a net $209 million into the stock between Monday and Thursday.

Alisha Higgs, a 33-year-old individual investor from Louisville, Ky., has notched a more than $17,000 return on AMC shares after loading up on the stock since the start of the year. She had never day-traded before January, she said, but became interested when she saw another individual investor touting AMC on Instagram.

For months, she said, she started amassing a position in the company—currently 850 shares in her Robinhood Markets Inc. account—believing that the stock could easily blow past $50, then $100. She held steady amid dips and climbs in the share price in recent months, she said, increasing her position. Her patience has been rewarded this week.

“It’s time for the retail investor and average person to take some power and make some money,” said Ms. Higgs, who works a corporate job and invests in real estate on the side.

As for her plans when she eventually takes profits? “I don’t care about cars, watches, none of that,” she said. “I want to get out of the rat race.”

For months, individual investors such as Ms. Higgs have closely monitored short seller activity in stocks like AMC, hoping to once again vanquish Wall Street investors who looked skeptically upon so-called meme stocks. Short sellers are investors who bet against a company by borrowing shares and selling them, betting they can buy them back later at a lower price.

Yet short sellers can be burned by such wagers, especially when a stock begins rising, forcing them to buy back shares to limit their losses. That, in turn, can drive further share-price gains—creating what’s called a short squeeze.

Short sellers faced massive losses in January on stocks like AMC and

GameStop Corp.

when shares rallied during the height of the meme stock frenzy.

Many are seeing glimpses of that again: Investors who took short positions in AMC have lost at least $1 billion this week, according to Thursday afternoon data from S3 Partners. Short interest in AMC stands at about 20% of the stock’s free float.

The frenetic rally in AMC shares this week has also coincided with a burst of options trading tied to the stock, with activity surpassing levels recorded during the initial meme stock mania in January. More than 3.2 million options contracts changed hands on Thursday, a record, according to data provider Trade Alert. Some of the most actively-traded options have been bullish call contracts tied to the stock jumping even higher, to $40 or $59.

Options give investors the right to buy or sell shares later in time, at specific prices. Calls confer the right to buy, while puts give the right to sell shares. Options trading in certain meme stocks took center stage earlier this year, with some traders saying that the activity was exacerbating moves in the underlying shares themselves.

This week’s rally in AMC hasn’t been limited to solely the equity markets. AMC bonds have also been rallying.

The company’s 10.5% secured notes due in 2025 traded Friday at 108.5 cents on the dollar, according to MarketAxess, translating to a yield around 6.2%. That was unchanged from Thursday but up from around 70 cents at the start of the year. The company’s 12% subordinated bonds due in 2026 traded Thursday at 97.75 cents, having traded in November as low as 5.125 cents.

The coronavirus pandemic shuttered every single AMC theater for months. But the pandemic isn’t the only thing pushing the company onto financially shaky ground. Photo Illustration: Jacob Reynolds/WSJ (Video from 11/30/20)

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By rahul