Speculative trading activity in AMC Entertainment, the meme stock that has become popular with small investors recently, has pushed the shares of the struggling movie theater chain to double-digit growth.
Shares of AMC surged 23% to nearly $57 on Monday, following an 80% rally in the previous week. AMC has gained more than 120% since the beginning of the month, after a wild growth of 160% in May, pushing its 2021 rally to over 2,600%. Last week, the trading frenzy sent AMC stock to an intraday record of $72.62.
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A speculative buying mania swept Wall Street in January due to a wave of stay-at-home traders who used social media, in this case Reddit’s WallStreetBets forum, to coordinate massive short squeezes. As a result, meme stocks like GameStop, a struggling brick-and-mortar video game retailer, and American basic cable television channel AMC catapulted.
On Monday, other meme stocks also gained momentum. Bed Bath & Beyond soared 7%, BlackBerry surged over 8%, while GameStop advanced nearly 6%.
“It is extremely tempting to short these stocks, but unless you have huge liquid resources, please try to resist the temptation because these prices can go to unimaginable highs before they settle down to a reasonable valuation, and you may have to cover on the high point,” Interactive Brokers chairman Thomas Peterffy told CNBC.
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“On the long term, stocks always approach their fundamental values, which in this case is much, much lower,” he added.
Taking advantage of the rally, AMC sold 20 million shares last week, raising $800 million for the struggling company. CEO Adam Aron said he plans to sell up to 25 million more shares.
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