AMC Entertainment (AMC) shares fell sharply Thursday after the group said it plans to sell around $800 million in shares though an open market program and cautioned investors against purchasing them "unless you are prepared to incur the risk of losing all or a substantial portion of your investment."
In a Securities and Exchange Commission filing published Thursday, AMC said it would look to sell 12 million class A common shares through B. Riley Securities, Inc. and Citigroup Global Markets "from time to time, through an “at-the-market” offering program."
AMC raised around $430 million from the sale of 43 million shares into the open market in early May, at $9.94 each. It also sold 8.5 million shares directly to Mudrick Capital earlier this week, with the hedge fund immediately flipping the shares into the open market after reportedly citing them as "overvalued".
"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 the SEC filing. "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."
"Extreme fluctuations in the market price of our Class A common stock have been accompanied by reports of strong and atypical retail investor interest, including on social media and online forums," the statement added.
AMC shares were marked 41% lower on the session by late morning, following two trading halts on the New York Stock Exchange, to change hands at $38.10 each. The stock traded as high as 72.62 each during yesterday's rally.
AMC posted a wider-than-expected loss of $1.42 per share, with revenues collapsing 84% from last year to $148.3 million, for the three months ending in March.
Nearly $40 billion worth of AMC shares changed hands on Wall Street yesterday, far outpacing the market's most-active stocks, as investors clamored to ride the gains of the world's biggest movie theatre chain following the exit of hedge fund Mudrick Capital and the launch of an AMC 'portal' that will enhance communication between CEO Adam Aron and the group's 3.2 million retail investors
Options market activity also offers an explanation for the stock's meteoric gains, with volumes in AMC hitting a record high of 4.6 million Wednesday amid what traders described as a so-called 'gamma squeeze'.