Mudrick Capital Management, the hedge fund run by Jason Mudrick, netted a swift profit from the return of the meme stock-trading frenzy after buying and quickly selling a stake in the cinema chain AMC Entertainment.
AMC on Tuesday announced that it had raised $230.5m by selling 8.5m new shares to Mudrick at just over $27 per share, saying it planned to play “offence” by using the proceeds to buy smaller movie theatre chains that had struggled during the pandemic.
Before the day was up, Mudrick had sold the entire position, according to a person familiar with the fund’s trading.
The exact size of the profit could not be learned, but AMC shares had responded enthusiastically to the fundraising news, jumping as high as $33.53 in Tuesday morning trading, up more than 28 per cent from Friday’s close.
Mudrick Capital Management declined to comment on the trade. AMC Entertainment did not immediately respond to a request for comment.
AMC’s shares more than doubled last week in an echo of the frenzied trading by retail investors in January, when the company was one of several “meme stocks” — most notably GameStop — championed on social media sides such as the Reddit discussion forum r/WallStreetBets.
Mudrick had always intended to sell the shares quickly, perceiving the company to be overvalued after the recent return of Reddit-fuelled trading, said the person familiar with the trade.
By mid-afternoon in New York, the AMC share price had eased to $31.40, still up roughly 20 per cent on the day.
Tuesday’s windfall was not the first time Mudrick had profited from a bet on AMC shares. It lent $100m money to the company last year when the closure of cinemas threatened to send it into bankruptcy, and took shares as a fee for the loan. And earlier this year, it swapped existing AMC bonds for new shares and quickly sold those. The two share sales together netted $200m in profit for the fund.
Jason Mudrick, a distressed specialist, founded the firm in 2009 and now manages about $3bn in assets. Mudrick’s Distressed Opportunities Fund returned 11.3 per cent to investors last year, net of fees, according to a report from HSBC.
The private equity firm Silver Lake Partners has also taken advantage of retail investor-driven surges in AMC’s stock price this year. In January it exercised its right to swap a $600m bond in AMC shares netting it a $113m profit.
In May, Dalian Wanda, AMC’s longtime controlling shareholder, sold virtually all its 7 per cent stake at about $14 per share.