Adam Aron says he wants to increase his Twitter following to include about 1,000 more professed small-investor shareholders of the company he runs, AMC Entertainment.
His goal is to better “understand this phenomenon that has changed who owns AMC.” But based on the type of AMC shareholder who hangs out on Twitter, he may be surprised — and more than a little embarrassed — by what he finds.
AMC, of course, is the world’s largest movie-chain business, synonymous for many years with blockbuster movies, sticky floors and terribly overpriced popcorn.
But Aron’s and AMC’s problems don’t end there. Pre-COVID, it was streaming that offered a cheaper alternative than going to the movies. During COVID, it was forced government closures of many AMC theaters.
Post-COVID, his worries are still streaming — just more pronounced. Streaming movies has been ingrained into the mainstream and the theatrical window has shortened. Plus, even the vaccinated may not want to be crammed into a movie theater and risk a breakthrough infection.
Add one more worry to the mix: An investor base composed of some of the least sophisticated, financially incurious and nasty people out there. In the past, AMC was like most companies, with large institutions — money managers and pension funds — being its biggest shareholders.
No longer. The big guys ran for cover because they think a theater chain is a lousy long-term business. Filling their void over the past year was some 3 million individuals who now control anywhere from 70 to 80 percent of outstanding shares.
The reason: AMC is one of those so-called meme stocks small investors piled into earlier in the year just because, you know, they could. They’re called meme stocks because for the most part there’s really nothing fundamental driving this investor obsession other than a desire to wreak havoc and attack those who dare mention that AMC is losing money.
The people piling into stocks like AMC and another meme stock, GameStop — a video-game retailer mostly found in malls — refer to themselves on Twitter as “Gorillas” and “Apes” and they find it thrilling to band together and drive up stocks that Big Wall Street has abandoned. Based on some of my reporting on these folks, they’ve found a sense of community and, in some cases, the lure of a cult in doing so.
To some of the cult members, it’s a modern day David-vs.-Goliath scenario that’s producing biblical results. David had a slingshot. These folks are armed with their no-trading-fee Robinhood apps, endless stimmie checks and nothing better to do than scour investment message boards for ways to disrupt the markets.
After a hiatus, meme-stock mania is back. Over the past five days, shares of AMC, for instance, have soared 116 percent even with Friday’s dip. The company’s market cap is nearly $12 billion — several times as high as it was pre-pandemic when the company wasn’t losing money, and far more than when it was a penny stock last year seemingly headed for Chapter 11.
Hopefully, as he gets to know his shareholders, Aron will learn what I’m describing here: that a large part of the motivation to keep buying his stock isn’t their love of the movie business.
It’s to join a cult of investors spreading the word on financial message board Reddit that they should join a movement that puts making money secondary. It’s mostly dedicated to sticking it to “the man” — namely hedge funds who were shorting shares of AMC and would make money if the stock continued to fall (and losing a ton now as the stock keeps surging).
For them it’s fun watching this “short squeeze” play out. The meme buyers made big headlines earlier in the year when one hedge fund shorting memes nearly went out of business.
Making less news back in January was that some of the Davids also got crushed when AMC and GameStop fell off their highs. Unlike the hedge funds, these investors weren’t multibillionaires with access to new capital. The losses hurt.
Now the meme short-squeezers are back on AMC. Message boards and Twitter are lighting up with calls to buy the stock. AMC jumped from $12 to above $26 last week, and judging by message-board activity, there isn’t much desire for the Davids to sell anytime soon as they sense yet another opportunity to stick it to “the man.”
Unfortunately, that philosophy also leads some of these Internet investors to mock, harass and insult anyone who questions their activities with trolling not suitable to describe in a family newspaper.
I have spoken to Aron about the dark side of his investor base, and I believe it when he says that, while he “wholly embraces” his new shareholders, he doesn’t condone any of the trolling behavior. I also think it’s a good idea for him to get to know them. Aron is saying that he already follows on Twitter 1,000 people who say they are AMC investors and many of them are decent people trying to make money in the markets.
“The goal is not to fan their flames,” Aron says.
But it would be nice if he understands the motives of many of these folks. Running around and colluding with other investors simply to cause a short squeeze comes dangerously close to market manipulation.
If SEC Chairman Gary Gensler wasn’t so obsessed with turning corporate-woke, he would look into what’s happening with the manipulation of the meme stocks. In the meantime, good luck to Aron in getting to know his owners. The next shareholder meeting should be a doozy.