AMC has risen in price five-fold, but the spike may actually have long-term positive implications for the company this time. Here's why.
Doubling The Cash Pile
The run up in the shares may have changed that calculus. The company may have more than doubled its cash pile from selling shares since March. Now of course, you can debate the merits of AMC as an investment, but precisely because of the run-up in the shares and the associated issuance at these relatively high prices, the company now has a lot more cash than it did before. AMC’s financial future appears a lot more robust than it was at the end of March, but not because of operational changes, because of selling shares.
Buy selling shares as prices spike, the companies themselves are actually changing and potentially improving their fortunes because of these spikes, even if don’t last. It seems highly unlikely that this financial engineering alone actual justifies all the rapid increase in value, but maybe it accounts for a portion of it.Normally, swings in the prices of shares shouldn’t matter for the operational performance of a company.
Simon is the author of Digital Wealth and Strategic Project Portfolio Management. He has previously served as Chief Investment Officer at Moola and FutureAdvisor, bothSimon is the author of Digital Wealth and Strategic Project Portfolio Management. He has previously served as Chief Investment Officer at Moola and FutureAdvisor, both are consumer investment startups that were subsequently acquired by S&P 500 firms. He is a CFA Charterholder and educated at Oxford and Northwestern.
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