Is AMC The New Gamestop? How Social Media Is Driving The Market

One of the hardest-hit industries during the pandemic has been movie theaters but on Wednesday shares of cinema giant AMC Entertainment Holdings (AMC) saw a massive surge. The climb even found its way on social media, much like the recent surge in Gamestop (GME), suggesting a new type of trader is making waves during the pandemic.

For the nine-month period ending Sept. 30, the cinema company reported a massive multi-billion-dollar loss due to COVID restrictions, which either restricted capacity or outright closed theaters. But fueled by commentators and traders on social media, AMC saw shares jump more than 300% in pre-market trading and remained up nearly 200% during the day.

As of 11:28 a.m. ET, shares of AMC were up 227.67%.

On social media, traders boasted of their use of options, where the payoff comes only if the stock soars. Those commenting on Reddit keep saying they’re buying shares, driving the price even higher. That, in turn, stirs a rally as more and more investors take interest.

With shares in the cinema company surging ever higher, #SaveAMC was popular on social media. Overnight, a Twitter profile from Reddit prompted the rush, wondering if the thread would be trending anytime soon.

"FOMO" refers to "fear of missing out."

That tweet may reflect the trend in retail investors, who may rush toward certain stocks in herd fashion, despite the lack of fundamentals supporting the move.

On Reddit, these so-called retail investors are using Gamestop as a rallying cry of sorts against traditional market players, with traders touting their fortunes from shares in the retail video game outlet on the wallstreetbets thread. And on Twitter, it seems like it’s AMC’s turn, prompting analysts to weigh in.

“These are not normal times and while the (Reddit) ... thing is fascinating to watch, I can’t help but think that this is unlikely to end well for someone,” Deutsche Bank strategist Jim Reid told Reuters on Wednesday.

It also raised the attention of regulatory authorities. William Galvin, the secretary of the Commonwealth of Massachusetts, told Barron’s this week he had concerns about the run on what would normally be undervalued stocks like Gamestop.

“This is certainly on my radar,” he said. “I’m concerned, because it suggests that there is something systemically wrong with the options trading on this stock.”

But on Reddit, the enthusiasm continued.

“Is it too late to buy?” one user posted.