Why Is AMC Buying Gold?
Meme stock AMC is buying 22% of a Nevada-based miner of gold and silver, diversifying away from its core movie-theater operations in order to “adapt its business model to a post-Covid-19 world.”
AMC has stated that it will invest $27.9 million in cash in Hycroft Mining — AMC CEO Adam Aron took to Twitter, “AMC is playing on offense again with a bold diversification move.”
AMC shares ticked up 3.1% in premarket trading, while shares of publicly listed Hycroft surged 88%. Hycroft, which owns the Hycroft Mine in northern Nevada, said the company had also received investment from Eric Sprott, a prominent precious-metals investor.
The movie-theater company last year became a “Meme stock” among retail investors who piled into shares of the company during lockdown retail mania. Many traders still haven’t sold. The company has used its investor base to turn around its finances. Earlier this year, Aron stated he intended to refinance some of the company’s expensive debt to reduce its interest exposure and push out some debt maturities by several years.
Hycroft owns a more than 70,000-acre mine in northern Nevada that is said to contain 15 million ounces of gold and 600 million ounces of silver.
Despite rising inflation, Hycroft’s shares have been hammered over the past two years.
Aron characterized the investment as “a company in an unrelated industry that appears to be just like AMC of a year ago. It, too, has rock-solid assets, but for a variety of reasons, it has been facing a severe and immediate liquidity issue.” The investment may signal a new school of thought in investment decision making and executive operations, not only seeking to provide shareholder value but to also lift up companies that the market has disregarded. AMC was on the brink of bankruptcy when ordinary investors en masse rescued the beloved brand sending share prices to new highs.
AMC will receive 23.4 million shares in Hycroft, consisting of one common share and one common share purchase warrant. AMC will receive a board seat on Hycroft with its. investment. The investment is a unique move that will enable the company a balance sheet hedge against rising inflation while also providing business diversification. Corporations and financial institutions alike are monitoring the market with caution as volatility, supply chain woes, and inflation leave unpredictable outcomes.
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