The week’s most bizarre, hilarious, and amazing story just took another crazy turn. Reddit’s rebels may have just saved AMC Theatres from more than half a billion in debt.
The theater chain, like pretty much all theater chains, has been ripped by the COVID pandemic. It’s difficult to remember, since “two weeks to flatten the curve” turned into “we’re never ever ever getting back to normal,” but theater chains were enjoying something of a revival in late 2019 and early 2020. Theaters had decked themselves out with comfortable chairs and dinner tables, and served quality food and drinks to go with the movie. A night out at the movies was great again.
Then COVID struck and no one could go to the movies. One summer COVID weekend several months into that “two weeks” thing, The Empire Strikes Back returned to dominate a very terrible, no-good-at-all box office. And that was at a drive-in theater.
AMC Theatres was just about dead as of Monday of this week. But along with GameStop and BlackBerry, Reddit’s r/wallstreetbets (WSB) targeted AMC’s stock for a revival. “We like the stock,” they said.
[O]n 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.
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.”
That’s thanks to a few million retail stock buyers who constantly insult themselves and swear they’re financial idiots between swearing revenge on the architects of the 2008 financial collapse.
The contrast between them and the hedge-fund predators they’re targeting on the GameStop stock could not be more dramatic now. WSB targeted GameStop because Melvin Capital had overleveraged itself betting that GameStop would lose value and die. They wanted to save the video game seller, sure, and they wanted to draw blood from the company that was betting on GameStop’s death.
Here, they’ve put their cash on the line and given AMC a significant reprieve just in the nick of time. Maybe it will last long enough for normal to return after all.