Here's Why AMC Entertainment Stock Jumped Today

This post was originally published on this site

Feb 18, 2021 at 12:49PM

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Question an investing thesis — even one of our own — helps us all think critically about investing and make decisions that helps us become smarter, happier, and richer.

What happened

Shares of AMC Entertainment (NYSE:AMC) have had an active last month to say the least. Along with other Reddit trades like GameStop (NYSE:GME), its shares had rocketed up before coming back down to earth. 

Shares of AMC jumped 13% again early Thursday morning before settling back to a gain of 4% as of 12:10 p.m. EST.

So what

Today’s buying activity may have been spurred by the lawmaker hearing that is scheduled for this afternoon on Capitol Hill related to the Reddit trades and Robinhood’s role. But there’s another obscure piece of news that was reported this morning by Bloomberg. 

The news agency found that an article in Forbes France translated and reiterated an old piece by Forbes‘ U.S. entity related to speculation that Amazon (NASDAQ:AMZN) may be interested in acquiring the theater chain. The only problem is that the original article is almost a year old, as the newly dated French piece notes at the bottom of its translation, according to Bloomberg.

Image source: Getty Images.

Now what

A spike in the stock from a purely speculative article isn’t something investors should take part in. The fact that the original speculation was from May 2020 shows that some investors buy or sell first and ask questions later. 

As for the business itself, AMC had solidified its balance sheet by raising capital even before the stock became part of the volatile Reddit-inspired trades. It subsequently raised another $305 million on Jan. 27 through an equity offering. 

While bankruptcy is likely off the table — as AMC president and CEO Adam Aron said in late January — the business fundamentals are what investors should be using to determine if the business will get back on its feet after pandemic effects subside.