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05/15/2024 |

Meme Stocks Dilute Again

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The Resurgence of Meme Stocks

AMC and GME‘s stocks surged on Monday following a tweet from trader Keith Gill, aka Roaring Kitty. This marked his first tweet since 2021, reviving the trading frenzy from that period. The resurgence led to a 32% increase in AMC‘s stock on Tuesday, bringing its week-to-date gains to 135.4%. The news also spurred a rally in AMC‘s high-yield bonds, which offer yields close to 30%.

AMC’s Debt-for-Equity Swap and Stock Offering

Taking advantage of the 135% increase in share price this week, AMC announced a debt-for-equity swap in which it will issue 23.3 million shares in exchange for $163.9 million of bonds maturing in 2026. The stock is being issued at an implied value of $7.33 per share, while AMC‘s stock closed Tuesday at $6.85.

Additionally, they completed a $250 million at-the-market offering on Monday at an average price of $3.45 per share. This offering, which was originally announced on March 28, is part of AMC‘s strategy to reduce its debt, which includes more than $2.5 billion in outstanding bonds.

Comparison to 2021 Meme Stock Mania

Despite the initial surge and a whopping 38 halts between the two names during trading on Tuesday, inflow numbers suggest that retail interest in GME and AMC appears to be smaller and potentially shorter-lived compared to the 2021 mania. Data shows net retail trader inflows of $15.8 million for GME and $37.5 million for AMC on Monday, versus peak daily inflows in January 2021 of $87.5 million and $170 million, respectively.