Share sales that target small retail investors are gaining popularity as companies seek to cash in on rallies spurred by Reddit-fuelled day traders.
By Katie Greifeld and Vildana HajricBloomberg
Share sales that target retail traders are reaching new heights of popularity with the rise of money-hungry meme stocks like AMC Entertainment Holdings Inc.
AMC slumped as much as 40% on Thursday after announcing plans for another stock offering this week. This time, it’s an at-the-market offering, which deploys the historically unusual strategy of selling shares directly into the open market – where retail traders had driven a 2,850% runup this year through Wednesday’s close.
Express Inc., another day-trader favorite, fell as much as 26% on Thursday after announcing an at-the-market offering of its own. Traditional stock offerings are sold almost entirely to institutional investors, but the rise of retail trading is leading corporate issuers like these to cater their financings to whoever the buyers are.
About $40 billion of at-the-market offerings have been announced this year in the U.S., according to data compiled by Bloomberg. That windfall is on pace for the biggest year ever, and it’s already surpassed the annual tally for every year on record except 2020, when retail trading ballooned during the thick of pandemic lockdowns. Meme stocks like Hertz Global Holdings Inc. and Tesla Inc. brought one at-the-market offering after another while their stocks rose even as the pandemic battered balance sheets.
AMC announced its latest of several at-the-market offerings after the spread between the stock’s closing price on Wednesday and Wall Street’s average 12-month target rose to a record of 92%. That’s even steeper than the 76% spread for GameStop Corp. when it announced a record $1 billion at-the-market offering in April. Express was at a 37% premium to its consensus target.
AMC’s rally has led to warnings about investing at these elevated levels — perhaps the most dire one from the company itself.
“We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last,” the company said in a filing. “Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.”
Shares pared their losses Thursday afternoon, when AMC said that it completed its stock sale program, raising $587.4 million at an average price of about $50.85 per share. The stock was trading around $44.65 at 1:23 p.m. in New York.
(Updates with latest trading and to add that AMC completed its share sale program.)