Key Events
👉 Meme Stock Rally Loses Fire Power
Both AMC and GameStop (GME) surged in trading on Monday and Tuesday before sharply falling in Wednesday trading.
This 100%+ stock price resurgence comes after the rally of the meme stocks in January 2021 with “Roaring Kitty” coming back to social media with his first tweet since June 2021. A very meaningful one. A man leaning forward. Almost as if getting serious. This brought out the Redittors of Wall Street Bets (WSB) who started buying up the names.
Combined GME and AMC gained nearly $14B in market value. Yes, “B” for billions. And, AMC really took advantage of this.
AMC was selling stock prior to the recent run up in stock price. And Tuesday’s lift came at the end of their share issuances. It was an at-the-market offering on March 28 that ended in 6 weeks. Aka this past Monday.
In an at-the-money offering (ATM), the Company offers secondary public shares, a follow-on offering, on any specific day, based on the prevailing market price. This can help the firm raise additional capital in a flexible manner because if the Company is not satisfied with the market price on a given day, it can choose to not offer any additional shares on that day. This makes it an effective offering method for companies that have volatile stock prices and want to capture upward price movements.
But, the major price swing happened after the follow-on offering. Which makes sense. Prices benefit not from a supply glut but from pent up demand.
Knowing that one person can create such large swings. Maybe AMC should hire Gill to make those “marketing” posts. Then, in advance AMC would prepare to sell shares into the open market.
How much would AMC pay? Quite a bit. Their market cap jumped $2B just from a tweet. While you can argue that it is transitory, the value here is the reduction in financial distress costs baked into the market price. That is, the Company can delever its balance sheet (reduce its debt burden), saving interest and principal repayment, which can help the firm to continue to operate more sustainably.
But, maybe this is insider trading. The Company is benefiting from material, non-public information. Seems shady.
Regardless, Tuesday, the Company took advantage of the heightened share price at the open by equitizing (converting debt to equity) $164M of its 10%/12% Cash/PIK Toggle Second Lien 2026 Subordinated Notes at an implied value of $7.33 per share.
This is much better than selling $250M at $3.45 over the past 6 weeks. Great job AMC. It helps buy the Company liquidity for cheaper. Less dilution that is.
👉 April Headline CPI Report Shows Signs of Disinflation
The headline CPI number was below consensus, increasing 0.3%, while core CPI number was in line with consensus, also increasing 0.3%.
This inflation figure is an improvement from the months of February and March, which helps in the Fed’s argument for lower interest rates in 2024. But, more information is needed to show signs that inflation is cooling down to the 2% level, or roughly 0.2% on a monthly basis. That is 1.02^(1/12) – 1. To be accurate, closer to 0.17% month over month.
Headline inflation includes inflation in a basket of goods, while core inflation excludes food and energy prices, which are more volatile.
Retail sales came in below consensus after a strong March report.
The markets are looking ahead to the Personal Consumption Expenditures Price Index (PCE) which will be updated for the month of April on May 31.
Mergers & Acquisitions
Certainty of Sony Pictures’ bid to acquire Paramount are “fading” leading shares of Paramount to fall more than 7%.
Private Equity
KPS Capital Partners to buy Innomotics, the large motors unit of Siemens, for ~€3B.
Initial Public Offerings
Waystar, a healthcare payments software company, is seeking to raise ~$1B.
Venture Capital
SmarterDx, a revenue cycle management company, raised $50m in Series B funding.
