© Reuters. FILE PHOTO: An AMC Theater is shown in Times Square in the Manhattan borough of New York City, New York, USA, June 2, 2021. REUTERS / Carlo Allegri
By David Randall and Sinéad Carew
NEW YORK (Reuters) – Free popcorn for shareholders. Following over 500 die-hard fans of your company’s stock on Twitter. Retweeting a video of what appears to be a plane flying a banner with the battle cry “AMC to the Moon” around Manhattan.
Welcome to the world of AMC Entertainment (NYSE 🙂 Holdings Inc, Chief Executive Officer Adam Aron, who since the beginning of the year has taken the role of lead promoter of a company on the brink of bankruptcy to new heights.
At a time when many on Wall Street argue that the movie theater operator is overvalued and urgently needs an accelerated economic recovery from the coronavirus pandemic to justify his stock price, 66-year-old Aron leans toward the growing power of individual investors to keep so-called meme stocks up.
“Watch out for naysayers, AMC will be back on offense. Here we go!” Aron wrote in a June 1 tweet https://twitter.com/CEOAdam/status/1399683077660721152.
He’s been riding a wave of excitement for stocks. AMC shares have risen nearly 3,000% since the beginning of the year and nearly doubled on Wednesday to close at $ 62.55 a share, well above the average price target of $ 5.11 among Wall Street analysts, according to Refinitiv data. AMC is now valued at $ 28.2 billion, based on Wednesday’s closing price.
Aron, who became CEO in 2016 after leading the National Basketball Association’s Philadelphia 76ers, began promoting AMC after his stock was swept up in a retail buying frenzy in January.
AMC did not respond to a request for comment and Aron did not respond to a direct message on Twitter.
Aron is part of a growing number of executives on Wall Street like Elon Musk of Tesla (NASDAQ 🙂 Inc and the incoming chairman of GameStop Corp. (NYSE 🙂 Ryan Cohen, who seem to be doing more to woo retail investors than institutional investors.
“These individual investors probably own the majority of our shares,” Aron said during the company’s May earnings call. “They own AMC. We work for them. I work for them.”
Some analysts are skeptical that such a show will bolster AMC’s stock price in the long term. There are no actively managed equity funds among the company’s 20 largest shareholders, according to Refinitiv data, leaving open the risk that a shift in retail investor sentiment could quickly sink their shares.
“The Twitter horde loves him. He’s playing for the crowd and it’s working,” said MKM Partners analyst Eric Handler, who questioned AMC’s stated strategy of issuing new shares to raise capital. “It would be better if it improved the balance sheet and provided some stability to the business,” he said.
Michael Pachter, an analyst at Wedbush Securities, said selling enough movie tickets and popcorn to justify a $ 40 share price for the company, where it was trading early Wednesday, would require revenue to nearly double over its earnings. 2022 estimates of $ 322,000 per day. movie ticket screen and $ 6 per person in food and beverage expenses.
“It is difficult to understand why AMC would perform at twice its historical average,” he said.
Aron, whose career includes a decade as CEO of Vail Resorts (NYSE 🙂 Inc and a season as a leader at Starwood Hotels and Resorts Worldwide Inc, focused more on connecting with consumers than with retail shareholders in his previous executive roles. .
At the 76ers, for example, it was part of a charge to lower ticket prices, while at Vail Resorts it was instrumental in expanding the company into a national business. The company’s shares fell nearly 4% when he announced his resignation in 2006.
Promoting a company’s stock to retail investors can be the new reality for many companies, said Jim Paulsen, chief investment officer for the Leuthold Group.
“CEOs have always been showmen and a big part of what they do is put on shows for institutional investors,” Paulsen said. “You may have a Reddit group that is the focus of the tweet, but the reality is that institutional guys like me will find out just as quickly.”