Analysis: With popcorn and tweets, AMC’s Aron rides the wave of retail investors

Free popcorn for shareholders. After more than 500 die-hard fans of his company’s actions on Twitter. Retweet a video of what appears to be an airplane waving a banner with the rallying cry “AMC to the Moon” around Manhattan.

Welcome to the world of AMC Entertainment Holdings Inc (AMC.N) Managing Director Adam Aron, who since the start of the year has reached new heights as the chief promoter of a company on the edge of bankruptcy.

At a time when many on Wall Street argue the movie theater operator is overvalued and in desperate need of an accelerated economic recovery from the coronavirus pandemic to justify its course of action, Aron, 66, is looking at power growing from individual investors to keep soaring so-called memes stocks.

“Watch out for opponents, AMC will again play in attack. Here we are ! »Aron wrote in a tweet from June 1.

He rode a wave of enthusiasm for the stock. AMC shares have risen nearly 3,000% year-to-date and nearly doubled on Wednesday to close at $ 62.55 per share, well above the average target price of $ 5.11 among analysts at Wall Street, according to data from Refinitiv. AMC is now valued at $ 28.2 billion, based on Wednesday’s closing price.

Aron, who became CEO in 2016 after leading the National Basketball Association’s Philadelphia 76ers, began promoting AMC after his shares were caught in a retail buying spree in January.

AMC did not respond to a request for comment and Aron did not respond to a direct message on Twitter.

Aron is among a growing number of Wall Street executives such as Tesla Inc’s Elon Musk (TSLA.O) and GameStop Corp (GME.N) new chairman Ryan Cohen who appear to be doing more to woo the retail rather than institutional investors.

An AMC theater is pictured in Times Square in the Manhattan neighborhood of New York, New York, United States, on June 2, 2021. REUTERS / Carlo Allegri

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“These individual investors probably own the majority of our shares,” Aron said during the company’s earnings call in May. “They own AMC. We work for them. I work for them.”

Some analysts doubt that such showmanship will support AMC’s stock price over the long term. There are no actively managed equity funds among the company’s 20 biggest shareholders, according to data from Refinitiv, leaving open the risk that a shift in the opinion of retail investors could quickly bring down its shares. .

“The Twitter horde loves him. He plays with the crowd and it works,” said Eric Handler, analyst at MKM Partners, who questioned AMC’s stated strategy of issuing new shares to raise capital. . “He had better improve the balance sheet and bring some stability to the company,” he said.

Michael Pachter, analyst at Wedbush Securities, said selling enough movie tickets and popcorn to justify a $ 40 share price for the company – where it was trading early Wednesday – would require revenues to nearly double by compared to his 2022 estimate of $ 322,000 per screen in movie tickets and $ 6 per person in food and drink expenses.

“It is difficult to understand why AMC would perform at double its historical average,” he said.

Aron, whose career spans a decade as managing director of Vail Resorts Inc and a stint as head of Starwood Hotels and Resorts Worldwide Inc, has focused more of his attention on connecting with consumers rather than retail shareholders in his previous leadership roles.

At the 76ers, for example, he was part of a charge to lower ticket prices, while at Vail Resorts, he was instrumental in expanding the business into a scale business. national. The company’s shares fell almost 4% when he announced his resignation in 2006.

Promoting a company’s shares to retail investors can be the new reality for many companies, said Jim Paulsen, chief investment officer for the Leuthold Group.

“CEOs have always been showmen and a lot of what they do is put on shows for institutional investors,” said Paulsen. “You might have a Reddit group that is the center of the tweet, but the reality is institutional guys like me are going to hear about it just as quickly.”

Our Standards: The Thomson Reuters Trust Principles.




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