It is quite rare for a company’s stock price to double in a single day. Even more unusual is a doubling after being up over 1500% in the past 5 months. When that happens, a lot of investor and media attention is focused on the company. That has been the case for AMC and the company is really taking advantage of the trend in their own shares. The share price trend shown below has pushed their market cap from ~$1B at the start of the year to over $30B yesterday.
As trading volumes have exploded, their ownership composition has changed dramatically, the company is raising capital, and they’ve launched an entirely new focus for their IR program. A few highlights in each of these areas are included below. While it may seem unlikely that other IROs might experience something similar, there are a few important potential implications to consider.
Change in Ownership
Meme stocks got a lot of attention in the first quarter. Earlier this week, Kevin Herraiz provided a full recap of the resulting ownership changes. Over the past few days, these stocks have again been surging, driven by an abundance of liquidity and pent-up savings, as well as a return of the Reddit-driven retail frenzy. There has also been a notable uptick in small lot options trading which contributed to the surge as part of a hedging effect.
Daily trading volume in the past week has exceeded share count and price swings continue to be wild. AMC’s share price has moved from ~$2 at the start of the year to a ~$51 close on June 3, 2021, as shown in this chart.
Index funds now own about 80 million of the roughly 500 million shares outstanding. Much of that ownership has been driven by the sharp uptick in price, which forces some index funds to continue buying as prices rise. This does create the risk of an equally sharp downward pressure if share prices start to fall. Meanwhile, retail ownership has taken over as very few non-index institutions hold positions. It has been reported that AMC has over 3 million retail shareholders. It’s worth noting that even at the approximately 30% lower prices occurring at the time of this blog being written, average holding value would only be ~$6,000 per retail shareholder.
On June 1st, the company announced they had sold 8.5 million shares to Mudrick Capital, previously AMC’s top shareholder. They had exited their position in March after reportedly urging AMC management to take advantage of the market and raise capital. It’s believed that Mudrick rapidly sold the shares in the open market generating a quick profit on top of the gains they banked from their earlier position. AMC had previously filed two other “at-the-market” registrations.
Then, despite the run in the share price, on June 3rd AMC announced an 11.55M share at-the-market equity distribution agreement through B. Riley and Citi. At the completion of the offering, AMC stated that the total equity raised in Q2 is nearly $1.25B. Successfully accessing additional capital at these price levels is a rather impressive feat. The market has reacted with enthusiasm as the moves provide financing which may be perceived as enabling strategic actions to enhance shareholder value.
IR Program Redefinition
With over 3 million retail shareholders and practically no active institutional investors, the objectives of AMC’s IR program appear to be changing. On June 2, 2021, AMC launched a new investor communication initiative called “AMC Investor Connect”. This offers direct communication with individual shareholders to keep them up to date about important company information and provide them with special offers.
AMC’s CEO stated that this will help them continue to forge strong relationships with their owners; “After all, these people are the owners of AMC, and I work for them.” As an added benefit, shareholders can sign up on the platform to receive investor updates and to access special offers (such as a free large popcorn at AMC theaters).
Implications To Consider
This is a radical and noteworthy shift for IR. With the change in ownership composition and the launch of the platform, traditional IR priorities such as targeting, sell-side consensus monitoring, and buy-side outreach seem to be of diminished importance.
Certainly, the IR team will have to focus a lot of effort on enhanced disclosure being available on their website for all investors to access. Key points of investor interaction such as quarterly earnings releases and annual shareholder meetings may pose new challenges. For example, the IR team will have to determine how best to handle Q&A. Perhaps management will use a public platform to respond to live questions, or the IR team may enable an “upvoting”mechanism to prioritize questions from among their many owners.
In early May, the management team postponed their annual shareholder meeting to July 29, 2021 and shifted the record date to June 2nd to “provide additional time for its millions of current individual shareholders to have their voices heard and more time to cast ballots on important shareholder matters”. The IR team will have to prepare for a significantly different structure to a meeting which might involve millions of participants. They may also have to focus effort on achieving a quorum, as retail investors typically have very low attendance and voting habits.
The IR team may also need to shift some of their focus to building ESG-related relationships with their index fund shareholders. Passive investors such as Vanguard and Blackrock are taking stronger positions on environmental and diversity issues. Proposals or demands in these areas could garner substantial additional support from AMC’s retail base.
Going forward, there will be a lot of attention focused on details such as these. IR professionals will likely adopt some of the best practices AMC begins to establish. We’ll be monitoring the evolving story and will continue to keep our clients informed as it unfolds. For more insights on the changing retail investor environment, read The Rise of the Retail Investor.