AMC, a failing chain of movie theaters, bought a large stake in a Nevada gold-mining operation. Why?
Other Resources
- Quarter 1 2022 AMC 10-Q
- Quarter 1 2023 AMC 10-Q
- 2023 AMC 10-K
- Quarter 1 2022 Hycroft Mining 10-Q
- 2023 Hycroft 10-K
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Transcript:
00:00:00:03 - 00:00:11:18
Bennett Tomlin
AMC is ostensibly a chain of movie theaters, a place to eat popcorn and watch Morbius. However, did you know they own a significant stake in the Nevada gold mining operation?
00:00:11:20 - 00:00:27:19
Bennett Tomlin
If you peer behind the curtain at AMC, even slightly, you find a weird community of self-described apes who rallied to the company and especially the stock, making it one of several so-called meme stocks.
00:00:27:21 - 00:00:37:04
Bennett Tomlin
Meme stocks tend to trade with a market value disconnected from the business fundamentals, which leads to some strange dynamics.
00:00:37:07 - 00:00:45:12
Bennett Tomlin
Do you remember when GameStop proudly launched itself into the NFT marketplace that was driven by the so-called meme stock dynamic.
00:00:45:12 - 00:00:47:10
Bennett Tomlin
Getting back to AMC's goldmine.
00:00:47:10 - 00:00:52:10
Bennett Tomlin
to quote the AMC 10-q quarterly filing from the first quarter of 2022.
00:00:52:10 - 00:01:01:10
Bennett Tomlin
On March 14th, 2022, the company purchased 23.4 million units of Hycroft Mining Holdings as well as other warrants.
00:01:01:12 - 00:01:17:08
Bennett Tomlin
They wanted to make clear at the time that this was an investment and was not AMC entering the mining business. The total value of their investment and the warrants was listed on the balance sheet as $53.8 million.
00:01:17:08 - 00:01:28:02
Bennett Tomlin
Adam Aron, the chief executive officer of AMC, was a huge fan of the move, bragging on Twitter about how AMC's expertise to help them bolster their liquidity.
00:01:28:04 - 00:01:49:15
Bennett Tomlin
Whatever the fuck that means was going to be good for this mining company, actually. Fuck it. You want to know what I think that means? I think it means that Adam Aron knew that his nearly bankrupt chain of movie theaters had attracted an impressionable audience, and he had started to figure out how to take advantage of that audience.
00:01:49:17 - 00:02:08:18
Bennett Tomlin
Of course, that's just what I think. It's not like he tweeted about how he was going to be able to sell equity to those baggies. Also nice watermark. Regardless of the business justifications, we can certainly note that Adam was a huge fan of how much this decision made both of these stocks trade.
00:02:08:18 - 00:02:20:16
Bennett Tomlin
He also really did not like people who criticized this, and he kept insisting that they eat crow, while also insisting that, Hycroft kept finding more and more gold and silver.
00:02:20:18 - 00:02:35:06
Bennett Tomlin
They truly committed to this bit. If you were a member of AMC's Investor Connect service. You could even claim this gorgeous NFT. Someone even purchased a few of those NFTs a couple weeks ago for like $4 apiece.
00:02:35:06 - 00:02:50:04
Bennett Tomlin
So how did this brilliant investment, which they marketed heavily to their baggies, serve the company? Remember, it had a starting value of 53.8 million and one year later, quarter one of 2023.
00:02:50:06 - 00:03:07:18
Bennett Tomlin
It was worth 17 million on their balance sheet, a loss of 36 million. In the most recent filing. They valued it at approximately 9 million, a loss of $45 million. Brilliant work from the movie theater chain.
00:03:07:18 - 00:03:22:22
Bennett Tomlin
Just to be exceedingly clear, Hycroft was unprofitable from before AMC bought it, with its financial filings stating the company does not believe the novel process, as designed in the 2019 Hycroft TRS is economic.
00:03:23:00 - 00:03:49:12
Bennett Tomlin
This firm had not figured out how to profitably mine. They still have not figured it out in the intervening years either, with its most recent filing stating that they had finished extracting gold and silver at the end of 2022, and currently the company has no specific plans and cannot currently predict when the Hycroft mine may be back in production.
00:03:49:14 - 00:04:04:23
Bennett Tomlin
It's really hard to figure out why AMC decided to invest here. I mean, assuming they're a good faith actor who wasn't taking advantage of their low information audience, assuming that I am really stuck. But if we ditch that assumption,
00:04:04:23 - 00:04:10:12
Bennett Tomlin
AMC, a movie theater chain on the verge of going bankrupt, purchased an unprofitable gold mine.
00:04:10:16 - 00:04:35:07
Bennett Tomlin
And the only reason they could say was liquidity. And the only way I can interpret that is information. Poor investors who piled into the stock of an unprofitable mining company solely because they saw that the movie theater chain they had already emotionally committed to was also piling into it. Is that what you meant, Adam? Because that is fucked up.
