Founded by the Dubinsky family in Kansas City in 1920, AMC Entertainment Holdings, Inc. has been through an unlikely journey on its way to becoming one of the most traded stocks by retail investors. In 1962, they opened the first multiplex cinema in the world and are currently the largest cinema operator in the US, with an international presence in the UK and Ireland where they own the Odeon brand.

At the beginning of 2021, AMC’s prospects appeared bleak. Having suffered a year of virtually no revenue, AMC was behind on rent and desperate for funds. With a second wave of lockdowns dismaying any hopes of profitable movie theatre reopenings and major films on hold or abandoned, AMC became the target of short-selling by hedge funds. In short selling, a fund ‘borrows’ shares it believes will decline in price and sells them to investors at the market price, before waiting for the expected price decline. If and when the price falls, the fund can buy the ‘borrowed’ stock at the new, lower price, sell this to their investors in place of the borrowed shares, and profit on the difference. Costs are incurred in the borrowing process and should the price of the shares go up the fund’s losses are potentially limitless. Should the price rise significantly, a ‘short squeeze’ occurs, where funds must buy shares at any price to prevent it from rising further – in turn driving up the price still more.

As hedge funds opened large short positions in the stock of the struggling cinema group, groups of retail investors coordinated on social media platforms to buy AMC shares, driving up the price. This triggered a short squeeze that saw AMC shares rocket in price from $2 at the end of 2020 to nearly $20 in January 2021. The stock then fell back, though remaining significantly above pre-squeeze levels, before a similar process in May elevated the price for a second time. The behavior of certain funds and brokers in this period, some of whom attempted to stop retail investors from buying the stock, was sharply criticized. In turn, many in the industry consider the retail investors’ actions reckless and misinformed speculation.

Current stock prices are far above AMC’s 2013 IPO price of $18. AMC’s board has responded to this wave of funding by launching an aggressive growth strategy, buying new theatres, and upgrading existing outlets. This sparked concern among institutional investors in the heavily indebted company, who remain suspicious of the long-term support of retail investors. Vanguard holds a 9.8% stake in the company, but this stock is overwhelmingly the preserve of small retail investors.