Adam Aron, the CEO of AMC Entertainment Holdings Inc., knows what the Reddit retail-trading crowd has done for his company. The money-losing movie chain’s wild, four-month rally never would have happened without these small-time investors.

So earlier this month, Aron embraced them in a way that few, if any, other top executives in America have. He spoke directly to the new investors during the company’s quarterly conference call on May 6, cheering their passion, commitment and enthusiasm. He then urged the skeptical stock analysts to pay attention to these investors -- “read what these people write,” he told them.

It’s hard to know just how much of a direct correlation there is between that shoutout and subsequent investor demand for the stock, but what is clear is this: From that moment, AMC has soared above and beyond all the other meme stocks of 2021, nearly tripling in the past three weeks and leaving it up 1,132 per cent for the year.

That AMC announced a bigger-than-anticipated first-quarter loss that day seemed to matter to no one. Or at least not to those who have been frantically bidding up the stock.

“Obviously, we’re in a different time,” said Eric Wold, an analyst at B. Riley Securities. “But given the number of shares being issued and the majority of shares being held by individual investors, you’re focusing and addressing your largest constituency of shareholders.”

AMC representatives didn’t respond to a request for comment.

The encouragement from Aron has pushed traders to band together with the aim of squeezing out short sellers, adopting hashtags like #AMCSTRONG and #AMCSqueeze on Twitter. Even with Friday’s 1.5 per cent decline the stock has topped returns for Reddit’s first love, GameStop Corp., which is up roughly 1,078 per cent after a 13 per cent tumble on Friday.

A key driver for their interest in both AMC and GameStop was the ability to push back bigger investors who have bet against the companies by shorting the stocks. The combined rallies for AMC and GameStop this year has dealt shorts more than US$8.3 billion in mark-to-market losses through Friday’s close, including US$1.75 billion in losses this week alone, according to S3 Partners.

With short interest for both stocks remaining near 20 per cent, Ihor Dusaniwsky, S3’s managing director of predictive analytics, said he thinks there could be more pain ahead with a potential short squeeze.

Retail investors and Wall Street pros may have utilized bullish options to help push the movie theater chain higher. Friday saw a record 2.44 million calls snatched up marking a second straight day of record call purchases.

Big Loss

AMC’s larger-than-expected loss in the first quarter reflected the slow recovery of the theater industry, with a lack of new films giving customers little reason to return.

AMC’s debt obligations are growing, too. The US$1.5 billion worth of second-lien bonds due 2026 that it issued in December 2020 carry a so-called PIK toggle coupon that could increase the size of the debt tranche by as much as US$85 million in June when the coupon next comes due. The bonds offer holders the option of accepting 10 per cent cash coupon payments, 12 per cent payment-in-kind, or a combination, according to company documents.

Still, debt tied to the company has also rallied alongside shares, setting new highs in recent days. AMC’s bonds due 2026, which were trading at a low of 5 cents in November, were up a cent to nearly 99 cents on the dollar Friday, according to Trace trading data.

The return of meme stock mania has certainly caught some investors by surprise, with stocks like retailer Express Inc. and headphone maker Koss Corp. also surging this week. An equally weighted Bloomberg basket of companies that Robinhood Markets restricted trading of during the meme-stock craze early this year rallied 13 per cent this week, for its best week since mid-March.