5 minute read
AMC has a Gold Mine
from SMR May 2022
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AMC has a Gold Mine!
amc theatres (nyse:amc), the wOrlD's largest theatrical exhibitor, announced it is purchasing 22 percent of Hycroft Mining Holding Corporation (NASDAQ:HYMC) and its 71,000-acre Hycroft Mine in northern Nevada. Independent third-party studies reveal that the Hycroft Mine possesses a gold deposit of 15 million ounces and a silver deposit of 600 million ounces. AMC will also receive an extra 23.4 million Hycroft warrants valued at $1.07 per share.
The success of SPIDER-MAN: NO WAY HOME and THE BATMAN and 2022's encouraging industry box office heighten AMC Entertainment's conviction that we are on a glide route to recovery" stated Adam Aron, chairman, and CEO of AMC Entertainment.
Our strategic investment, which we announced today, is the result of our discovery of a firm in a completely unrelated industry that looks eerily similar to AMC a year ago. It, too, has good assets, but it has been dealing with a serious and immediate cash problem for various reasons.
So, its stock price has plummeted. We are certain that our engagement will substantially assist it in overcoming its issues – to both its and our benefit." We haven't checked in with AMC in a while for a reason. The great financial market story of 2021 was AMC — along with GameStop, Dogecoin, non-fungible tokens, and the broader rise in meme investing — but 2022 has signaled a bleak return to normal.
The market nowadays is more concerned with war, inflation, and sovereign default than with whether Adam Aron wore pants during a Zoom interview.
It's possible that the whole meme-stock craze was fueled by plenty of cash and Covid lockdowns and that it's now over. Still, "AMC gets a stake in a micro-cap gold miner" is a fantastic end-of-thememe-stock-era quiz. What the hell is going on! In today's corporate finance, "diversification" is frowned upon. Diversification is an option for investors. You can own a meme-stock movie theatre chain and a penny-stock gold mine. You can purchase AMC on the stock exchange, Hycroft on the stock exchange, or both in whatever combination you wish. Except that today, whether you like it or not, when you buy AMC, you also get some Hycroft. Aron's purchase of a portion of Hycroft for AMC stockholders narrows their options.
"We're in a declining industry, we're making good money now, but we're worried about the future," one reason for a company to diversify might be: "We're in
HycroftMine
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a declining industry, we're making good money now, but we're worried about the future, so we'd better get into some new industries with a brighter future." In the metaverse, a thesis like that for AMC may advocate investing in a streaming service or a chain of movie theatres. Use some of AMC's experience in the entertainment industry to go into a nearby but more futuristic form of entertainment. No, it's a gold mine.
Even yet, you may make a semblance of a diversification logic here. AMC stock is a financial instrument that reflects Adam Aron's ability to do funny things that attract attention and delight people online.
It is in some ways an ownership share in a movie theatre chain, but it is also a financial instrument that reflects Adam Aron's ability to do funny things that attract attention and delight people online. It makes sense for AMC to grow into new and unrelated methods to do hilarious stuff online since the stock rises because people online get thrilled, not because AMC sells more movie tickets.
As a result, AMC is diversifying its memes by purchasing a stake in a gold mine. For starters, this purchase is amusing in and of itself, attracting attention and delighting people online. (As of 11 a.m. today, AMC's stock was up nearly 2.5 percent.) But, you know, gold has been a meme for millennia; owning a gold mine only offers you more chances to say things and get attention.
"The Fed has printed too much money, and hyperinflation is on the way; purchase movie tickets!" It seems strange, doesn't it? "... purchase gold!" on the other hand, works perfectly. Simply put, this is a massive increase in the meme arsenal. If you're a micro-cap gold company in need of cash, you might consider going to AMC in the near future. If AMC puts $28 million into your stock, it will become a meme and attract individual investors. This will increase the value of your stock, making it easier for you to raise a large sum of money at a lower cost. So it's fine for you to borrow $28 million from AMC for a pittance. Who cares if you give it a nice deal; it will make everything else better for you.
AMC's main business isn't gold mining, but neither is running movie theatres. It is raising funds through the meme-stock system, and it is currently offering its knowledge to other businesses.
AMC is an investment bank, or more accurately, a merchant bank, that assists small businesses with meme-driven at-the-market products in exchange for stock. It's an odd niche, but I suppose it's lucrative. It does, without a doubt, diversify AMC's cash flows.
Adam Aron, Chairman of the Board and CEO, AMC Entertainment, speaks at the 2021 Milken Institute Global Conference in Beverly Hills, California, U.S., October 18, 2021. REUTERS/David Swanson
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