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AMC Shares Soar After Company Raises $230 Million in Stock Sale

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Shares of

AMC Entertainment Holdings Inc.

AMC 19.87%

continued their rally Tuesday after the movie-theater chain said it raised $230.5 million by selling 8.5 million shares to New York hedge fund Mudrick Capital Management LP at a premium.

The stock, a favorite of individual investors on social-media platforms such as Reddit, soared 19% to $31.12 on Tuesday afternoon. The rally adds to AMC’s 116% climb last week and brings its year-to-date gains to more than 1,300%. The company’s recent stock performance has yet again underscored the power of the individual investor in markets and their ability to transform companies like AMC.

Just last year, AMC was warning of the possibility of bankruptcy after the coronavirus pandemic scrambled its operations. Then, in January, at the height of the meme-stock mania, individual investors banded together on social media to drive the stock higher. That was enough to help boost AMC’s fortunes.

In announcing its agreement with Mudrick Capital, AMC Chief Executive

Adam Aron

said in a news release that it was “time for AMC to go on the offense again.” The company said the cash proceeds from the share sale would primarily be used to pursue acquisitions of additional theater leases, as well as fund investments in the company’s existing theaters. It added that “AMC intends to continue exploring deleveraging opportunities.”

“Given that AMC is raising hundreds of millions of dollars, this is an extremely positive result for our shareholders,” Mr. Aron said in the news release.

The agreement with Mudrick Capital valued AMC’s shares at about $27.12 apiece, 3.8% above the stock’s closing price of $26.12 on Friday. The shares traded as high as $33.53 on Tuesday.

Bloomberg News reported Tuesday afternoon that Mudrick later sold all its AMC shares at a profit, citing a person familiar with the matter. A representative from the hedge fund didn’t immediately respond to a request for comment.

Mudrick Capital has been involved with AMC in the past, including in December when the movie-theater chain announced that the hedge fund had thrown the company a lifeline. At the time, AMC said Mudrick Capital committed to supplying $100 million in debt financing to AMC. It also said Mudrick would exchange another $100 million in existing debt into equity.

Mudrick Capital was later rewarded with sizable profits from its trading positions tied to the company after the January meme stock rally. The hedge fund is also affiliated with the special-purpose acquisition vehicle that is taking baseball-card maker Topps Co. public.

The rally in AMC’s stock price this year has largely been driven by individual investors who have scooped up shares, along with those of other meme stocks, including

GameStop Corp.

and

Express Inc.

Many have said they bought AMC as a way to vanquish Wall Street traders who have bet against the stock by selling shares short—a maneuver that occurs when an investor borrows shares and sells them, hoping to buy them back later at a lower price.

About 20% of AMC’s shares are currently sold short, according to data from S3 Partners. Investors who have taken short positions in AMC have suffered nearly $2.3 billion in realized and unrealized losses year to date.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com

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