AMC Entertainment Holdings (NYSE:AMC) Inc, the Odeon cinema owner and meme stock favourite, is taking a 22% stake in a struggling Nevada gold and silver miner Hycroft Mining.
AMC was at the heart of the meme stock storm last year that saw huge swings in its price driven by a community of retail investors r/WallStreetBets using the Reddit online forum.
These groups banded together and bet against hedge funds that were shorting the stock of the cinema owner and firms such as video chain Gamestop Corp.
And true to form there were huge swings in the share price of Hycroft yesterday.
After doubling at one point, the shares closed up 9% at US$1.52 while AMC added 7%.
“To state the obvious, one would not normally think that a movie theatre company’s core competency includes gold or silver mining," Adam Aron, AMC's chief executive said in a statement.”
"In recent years, however, AMC Entertainment has had enormous success and demonstrated expertise in guiding a company with otherwise valuable assets through a time of severe liquidity challenge, the raising of capital, and strengthening of balance sheets, as well as communicating with individual retail investors,” he added.
“Our strategic investment being announced today is the result of our having identified a company in an unrelated industry that appears to be just like AMC of a year ago,”
Hycroft has certainly had a troubled past and filed for bankruptcy in 2015 before re-emerging after a restructuring.
But its cash issues remain pressing according to the reports overnight with Reuters stating the miner had cash of around US$8mln ahead of the AMC investment, which is being matched by veteran Canadian mining backer Eric Sprott.
Combined, their investment is US$56mln split half and half with Hycroft adding it plans to raise a further US500mln to get its operation into production.
Hycroft, too, has become a bit of a meme stock favourite and saw big spikes in its stock price and trading volume ahead of this deal.
CNBC reported that trading volumes rose from around 355,000 March 1 to 58.6mln shares the day before and compared to a 90-day average of 10.5mln.
The deal was reportedly brokered by major Hycroft shareholder Mudrick Capital, whose founder Jason Mudrick approached Aron about how it could raise additional funding.
Mudrick took part in the debt restructuring that refinanced AMC in 2020.
Wedbush analyst Alicia Reese said the move was “a little baffling” and suggested that AMC should focus on repaying its US$5bn debt.