Why AMC shares fell on Friday

What happened

AMC Entertainment Holdings(NYSE: AMC) management engaged with retail traders on social media. He’s trying to take advantage of the new popularity as a memes stock to raise capital to help the underlying business. But the title has fallen in recent days, including a drop of nearly 7% during the session on Friday. Stocks cut those losses, but remain down around 5% as of 2:30 p.m. EDT.

So what

As the discussion about AMC continued to gain momentum on Reddit’s WallStreetBets forum, AMC CEO Adam Aron launched a strategy to embrace retail shareholders, who Aron says now represent more than 80% of the company’s shareholders. This appears to have re-energized the group, pushing shares up nearly 300% last month. It also appears to have helped drive out short sellers, forcing some to hedge their positions. During that month, AMC shares sold short fell from more than 22% of total shares outstanding to less than 17%, according to data from YCharts.

Image source: Getty Images.

Now what

Earlier this month, AMC announced a new platform called AMC Investor Connect aimed at attracting more retail traders to corporate theaters. AMC aims to use the new platform to help communicate with the retail shareholder base, offering things like free popcorn and special movie screenings.

Aron then took to social media asking shareholders to approve an additional 25 million shares to be put up for sale. Voting began on June 16 and the results will be announced at the company’s shareholders’ meeting in late July. Aron hopes this engagement will give the company more support to continue raising capital with its high share price relative to the social media movement.

With short sellers already hedging, the strength of a short squeeze diminishes. The weakness in stocks over the past few days, including today, may reflect this.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Virginia Ahn

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