AMC stock is on the rise again after investors on Reddit renewed their interest in the company.
Shares in the entertainment business first gained attention on the thread WallStreetBets.
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Shares in AMC Entertainment Holdings, which operates cinema chains across America, are listed on the New York Stock Exchange.
The stock nearly doubled in value yesterday, and hit $62.55 as markets closed in New York yesterday evening. Below we explain why.
But first, a word of warning: investing in stocks and shares is risky.
They can be volatile, meaning the price can go down as well as up leaving you with less money than you put in.
You should only invest money you can afford to lose as making money is never guaranteed when investing.
Why is AMC stock going up?
AMC has been labelled a “meme stock” which means it captured the attention of a group of investors who are active online.
AMC shares first went up dramatically in January after being targeted by investors who were active on Reddit, along with shares in Gamestop.
The share price then dropped, only to rise again in May as amateur stock investors on Reddit once again encouraged people to buy AMC shares.
Their aim is to “squeeze” professional investors, who will lose money because they bet on the share price going down.
Last month, AMC raised $428million by selling shares in the company, giving it fresh cash to spend on the business.
Yesterday, the share price of AMC then soared again as the firm promised to give free popcorn to smaller investors.
It added that shareholders would also get access to special screenings and discounts.
Cinema chains are starting to reopen again, after they were forced to close because of the pandemic.
What happened on Reddit?
A campaign by amateur investors on Reddit and a forum there called WallStreetBets has pushed up the price of AMC stock this year.
They did this in January in an attempt to make hedge funds – which had bet on the AMC stock price falling – lose money.
“Short selling” is when professional investors borrow shares of stock to sell, and then buy them back at a lower price.
Essentially, when investors are doing this they are betting that the stocks will drop in value so they can pocket the profit when they hand them back to the company they borrowed them from.
They rely on the company failing, making it a risky way of raising cash – any positive news could see shares rising and cause them to make a loss.
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Reddit users on the WallStreetBets thread encouraged individual investors to buy AMC shares to push up the price so these short sellers would lose cash.
The WallStreetBets Reddit group has several million members who share trading tips about how to beat “the system”.
Reddit users have also helped push crypto markets to new highs.
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