© Reuters. FILE PHOTO: An AMC theater is pictured in Times Square in the Manhattan neighborhood of New York City, New York, United States on June 2, 2021. REUTERS / Carlo Allegri
By David Randall and Sinéad Carew
NEW YORK (Reuters) – Free popcorn for shareholders. Follow more than 500 die-hard fans of his company’s stock on Twitter. Retweeting a video of what appeared to be an airplane flying a banner around Manhattan with the meme stick rally crying “AMC to the Moon”.
Welcome to the world of AMC Entertainment (NYSE 🙂 Holdings Inc. CEO Adam Aron, who since the beginning of the year has taken to new heights the role of chief promoter of a company that was on the verge of bankruptcy.
At a time when many on Wall Street are arguing that the cinema operator is overrated and in desperate need of an accelerated economic recovery from the coronavirus pandemic to justify his stock price, 66-year-old Aron relies on the growing power of the individual Investors to keep the so-called meme stocks on the rise.
“Attention Neiger, AMC will play on the offensive again. We’re coming!” Aron wrote in a tweet from June 1st https://twitter.com/CEOAdam/status/1399683077660721152.
He’s riding a wave of excitement for the stock. AMC stock is up nearly 3,000% year-to-date and nearly doubled on Wednesday, closing at $ 62.55 per share, well above Wall Street analysts’ average target price of $ 5.11, according to Refinitiv data . AMC is now valued at $ 28.2 billion based on Wednesday’s closing price.
Aron, who became CEO in 2016 after running the National Basketball Association’s Philadelphia 76ers, began promoting AMC after a retail spending frenzy hit its stocks in January.
AMC did not respond to a request for comment and Aron did not respond to a direct message on Twitter.
Aron is part of a growing number of executives on Wall Street including Elon Musk of Tesla (NASDAQ 🙂 Inc and the new chairman of GameStop Corp. (NYSE :), Ryan Cohen, who appear to be courting retail investors rather than institutional investors.
“These individual investors likely own the majority of our stock,” Aron said during the company’s conference call in May. “You own AMC. We work for you. I work for you.”
Some analysts are skeptical that such show manipulation will prop up AMC’s share price in the long term. There are no actively managed equity funds among the company’s 20 largest shareholders, according to Refinitiv data, which leaves open the risk that a change in sentiment from retail investors could quickly plunge the stock.
“The Twitter horde loves him. He plays with the crowd and it works,” said Eric Handler, an analyst at MKM Partners, who questioned AMC’s stated strategy of issuing new shares to raise capital. “He would be better off improving the balance sheet and adding some stability to the business,” he said.
Michael Pachter, an analyst at Wedbush Securities, said selling enough movie tickets and popcorn to justify a $ 40 stock price for the company – where it was trading early Wednesday – would require revenue to offset nearly double its estimates of $ 322,000 per screen for 2022 movie tickets and $ 6 per person for food and drinks.
“It’s hard to see why AMC would double its historical average,” he said.
Aron, whose career spanned a decade as Chief Executive of Vail Resorts (NYSE 🙂 Inc and one of the leading Starwood Hotels and Resorts Worldwide Inc., has been more focused on connecting with consumers than retail shareholders in his previous leadership roles.
At the 76ers, for example, he was involved in lowering ticket prices, at Vail Resorts he was instrumental in expanding the company into a nationwide business. The company’s shares fell nearly 4% when he announced his resignation in 2006.
Promoting a company’s shares to retail investors could be the new reality for many companies, said Jim Paulsen, Leuthold Group’s chief investment officer.
“CEOs have always been showmen and a large part of their job is putting on shows for institutional investors,” said Paulsen. “You may have a Reddit group that is the focus of the tweet, but the reality is that institutional guys like me will find out about it just as quickly.”