A hedge fund that helped AMC Entertainment Holdings raise US$230 million quickly sold its stake in the world's largest cinema chain at a profit, according to a source on Tuesday, when the "meme stock" soared by more than 20 percent, Reuters reports.
The move by Mudrick Capital Management to flip 8.5 million shares of the movie theater chain immediately after buying them in a private placement from the company shows how Wall Street is getting bolder about making a quick buck off a trading frenzy that has helped fuel big rallies in several stocks favored by retail investors.
Easy money from the Federal Reserve has "created an almost video game-like atmosphere in the stock market and investing," said Michael O'Rourke, chief market strategist at Jones Trading. "There's money flowing everywhere and this is a great illustration of that."
AMC said earlier Tuesday it issued https://sec.report/Document/0001104659-21-074526 8.5 million shares to Mudrick, the chain's latest share sale this year as it cashes in on a big jump in its stock in 2021.
Mudrick has sold its AMC stake at a profit, believing the company's shares are overvalued, the source familiar with the matter said on Tuesday. Additional details could not be immediately determined.
AMC did not immediately respond to a request for comment on Mudrick's divestiture reported earlier by Bloomberg News.
AMC said it would invest the proceeds in its existing theaters, which are set to benefit from a recovery in demand as more states lift coronavirus restrictions on social gatherings.
"This can be a real way for AMC to grow again, creating immediate value for AMC shareholders," Chief Executive Adam Aron wrote in a Twitter thread https://twitter.com/CEOAdam/status/1399683077660721152. "This is not mindless dilution, but rather this is very smart raising of cash so that we can grow this company."
AMC's stock closed up nearly 23 percent at US$32.04, leading a rally in other meme stocks.
