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Even AMC thinks its stock is overvalued, according to a filing made with the SEC on Thursday.
The company warned investors that they should only invest in their stock if they are prepared to incur massive losses.
“We caution you against investing in our Class A common stock,” AMC said in the filing.
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AMC Entertainment’s announcement Thursday that it could sell up to 11.6 million shares came with an unprecedented warning to its prospective investors: be prepared to lose most, if not all of your investment in our company.
The movie-theater chain has experienced a dizzying rally in recent weeks, briefly soaring to more than $70 and generating a year-to-date return of as much as 3,325% as retail traders piled into the name. At a $30 billion valuation on Wednesday, AMC was worth more than Best Buy.
AMC CEO Adam Aron is taking advantage of the meteoric rise, having raised hundreds of millions of dollars already this week. The company sold $230 million worth of shares to hedge fund Mudrick Capital on Tuesday, and hundreds of millions more can flow onto the company’s balance sheet depending on the pricing of its 11.6 million share offering proposal.
But AMC is aware that its stock is likely overvalued, given that the pandemic ravaged its business and even prior to the pandemic, the company wasn’t profitable.
“We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last,” AMC said in a filing made with the SEC on Thursday.
AMC also warned its investors against investing in the company unless they are prepared to lose all of their money.
“Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment,” AMC warned in the filing.
That risk was apparent in early Thursday trades, as the stock plummeted as much as 34% to $41.25.
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