Your Week In Brief

How AMC-Trading Millennials Tried to Save the Theaters After Destroying the Movies
Gregory BergmanFeb 05,2021,20:45

“We saved the movies!”

That's what my much younger (and annoyingly much taller) brother texted me during AMC’s showstopping stock rise.

Firstly, bro, you did not—nor did your fellow millennials you are so quick to credit for this “revolution.” In fact, your comic-book-obsessed, pro-geek generation is largely to blame for ruining them by championing an unrelenting series of films featuring characters in capes. That is what ruined the moves—and the theaters that play them. And this fact, along with good trading sense, is why I reversed course this week and bought a put option on AMC. Revenge, I say, for the Avengers movies and exorbitant Twizzler prices. (The put option has a strike price of $10 and expires Feb. 12.)

To be fair, the fault lies not only with your generation, brother. But while many theatergoers have long preferred spectacle over substance, there are way too many people I know in their mid-thirties who are unashamedly excited to see the next Fantastic Four. Yes, sometimes there is a genre-transcending masterpiece like The Dark Knight. But for the most part, the only thing groundbreaking these movies have to offer is a more diverse cast and crew. Wonder Woman? Please. All that did was prove that a woman was equally capable of making an equally successful yet equally vapid film. It was better than most (as was Black Panther), but it was still yet another product reflective of a juvenile culture. Best Picture nomination? Really?

While customers are at fault, the real culprit here is technology. The fact that even the poorest house is decorated with flat screens has predictably led to the obsoletion of movie theaters. “Do I really need to see Lady Bird in the theater," we ask ourselves? The answer is “yes,” but sadly, for most people, the answer is “no.”

And so theatrical experience becomes even more synonymous with spectacle, with theater offerings reserved to a few surefire Oscar candidates among a stream of countless big budget blockbusters as packed with action as they are void of substance.

You really want to save the movies? Boycott the next idiotic iteration of Superman instead of buying AMC’s stock. Remember seeing Borat in the theater? Moonlight? First Reformed? These are just a few non-comic book movies which required a theater viewing to fully experience their majesty. (First Reformed only played in theaters for a couple weeks).

I know, I know: Spiderman versus Aquaman Versus Predator versus Transformers is going to be EPIC!

Epically stupid, that is.

Between the prevailing childish aesthetic in our culture and technological advancement, the curtain has long closed on movies. It’s time to let the theaters die out as well; for you may have helped AMC temporarily stave off bankruptcy, but you have long played a role in the ruination of the great visual medium by supporting this dribble.

I understand that, in these isolated times, you want to be part of a revolution. But you are not part of any real, nostalgic-driven rebellion; you are part of a pump-and-dump scheme on a massive meme-fueled scale. What is particularly ironic is that so many of you first-time equities investors that jumped on GameStop and AMC are part of the very generation that prefers buying games online over in person, part of the same geneprefers to “Netflix and chill” over going to the movies—the two main trends driving the destruction of these brick-and-mortar companies, these relics of a dying era.

Consider AMC.

The diluted stock is as nightmare. In the third quarter, AMC had about 107 million shares outstanding, only to have 137 million outstanding by the end of November. Now, after selling about 260 million new shares to avoid bankruptcy, the company has approximately 400 million share outstanding. Even if AMC avoids bankruptcy, the company must generate four times the profit it posted pre-pandemic.

Too young to remember the movie Money Pit? Well, if you haven’t, don’t. Just know that AMC is the stock equivalent of that old, crumbling house.

And what AMC’s debt? So high that it is almost not worth mentioning. In fact, it isn’t worth mentioning—just know it is absurdly high. Ever see Brewster’s Millions? Well, even adjusted for inflation, it’s a lot more than Richard Pryor’s character inherited. And while revenue has risen in the theater business on appreciating ticket prices, attendance has dropped sharply. And the more AMC must charge, the fewer customers will show up. If this were a game of chess in the streaming success, The Queen’s Gambit, you might as well forfeit now and sell your shares. By the way, how did that chess revolution work out? Oh right, it “came” and went, leaving behind a few ridiculous perfume commercials featuring models sitting at a chessboard—likely for the first time.

Villains or Heroes or Neither?

If you bought one of these meme stocks out of an emotional need to part of this so-called populist movement to fight the powers that be, you might want to know that while fighting “Wall Street,” you made the rich richer. Take the investment team at Silver Lake, whose $600 million bond investment in AMC Entertainment Holdings in 2018 is now in the money thanks to the 301% surge in AMC’s stock price. As for GameStop, while fighting the short sellers, you inadvertently made Michael Burry, longtime investor in AMC, a few hundred million dollars wealthier. Burry, who said the GameStop rally was “insane and dangerous” owned 1.7 million GameStop shares worth $17 million at the end of September, reported Business Insider. Burry was made famous by Christian Bale’s portrayal of him in the film The Big Short. If you haven’t seen it, it’s about, you know, short-selling.

In that movie, it was Burry and his fellow shorts against Wall Street, against the banks who played with our deposits and the world economy as they preyed on people’s dream of owning a house. Between Burry and the AIGs and the Lehmans of the world, the shorts were presented as, if not the heroes, the less villainous.

So, when you are saying you are fighting “Wall Street,” what persons and which institutions are you talking about, exactly?

In the GameStop and AMC saga, the heroes and the villains are unclear. Are the villains the short sellers who bet against a couple of dying companies? Are the villains the Reddit Wall Street Bets members laughing, no doubt, all the way to the very Wall Street banks they claim to be fighting? Or are the villains the newbie retail investors themselves, riding an emotional wave that might undermine the very rationality of the markets and stock valuations upon which a relatively predictable and functioning market is supposedly predicated? Maybe the villain, the site whose name is meant to embody the everyman against the machine, yet who stopped investors from buying stock on fears of cash flow issues? Or is the villain the system itself?

(Worth noting, when you buy a stock on, you are not buying the stock instantaneously but entering into an agreement with Robinhood who uses a third-party to execute the transaction.), therefore, is neither folk-hero nor the evil Sheriff of Nottingham, but just a materialistic middleman.

How Will This Movie End?

No matter how this plays out, two things are certain: 1) Movie theaters (and good movies shown in them) are on the way out; and 2) The villains and the heroes of this saga may change, but the GameStop will stay the same.

The silver lining in all this, though, is that now retail investors have a seat at the table. They can play the game—and manipulate it too. A potent retail investor cabal does indeed make for a fairer fight, somewhat stripping the hedge funds of their superpowers. But you would be wise to take emotion out of investing. This is not one of your beloved simplistic parables of good versus evil. The world of stock trading, like mostly everything in real life or a good film, is not black or white, but gray.

In the final analysis, we are left in the end with a fascinating story about all-too-human greed and the all-to-human desire to be part of something bigger, something important.

Sounds like the making a good film. If you need an actor, feel free to forward my size card on to wardrobe.

What is my cape size?

I don't know. I’m not a child.

Topics:AMC, GameStop, GME, AMC