Marathon Profits from AMC Rally, Short Sellers Lose $2.3B

Marathon Asset Management profits from AMC's meme-stock rally, buying debt at 60 cents on the dollar, now over 90 cents.

By Alex P. Chase

5/15, 17:44 EDT
AMC Entertainment Holdings, Inc.
Marathon Digital Holdings, Inc.

Key Takeaway

  • Marathon Asset Management profits from AMC's meme-stock rally by buying its debt at 60 cents on the dollar, now over 90 cents.
  • Meme-stock phenomenon expands beyond AMC and GameStop, including companies like Marathon Digital and SoundHound AI.
  • Recent rallies cause over $2.3 billion in May losses for short sellers, highlighting the power of retail investors' coordinated efforts.

AMC's Strategic Moves Amid Meme-Stock Phenomenon

Marathon Asset Management has capitalized on AMC Entertainment Holdings Inc.'s recent meme-stock rally by purchasing the cinema chain's debt at a significant discount, as stated by CEO Bruce Richards on Bloomberg Television. The hedge fund acquired senior secured AMC debt at approximately 60 cents on the dollar, which has since appreciated to over 90 cents. This investment strategy has been bolstered by the equity raise AMC undertook, influenced by the resurgence of Keith Gill, known as "Roaring Kitty," on social media platforms. Richards expressed satisfaction with the investment, highlighting a 15% return and substantial downside protection due to the secured nature of the debt. AMC's proactive approach to leveraging its meme-stock status for financial restructuring, including a potential $125 million raise through an at-the-market offering, reflects its strategic efforts to navigate a $4.5 billion debt load and a quarterly loss of nearly $165 million.

Expanding Meme-Stock Frenzy

The meme-stock phenomenon, initially centered around AMC and GameStop, has broadened its scope to include companies like Marathon Digital and various AI-related firms such as SoundHound AI. This resurgence, fueled by discussions on the "wallstreetbets" Reddit forum, has also seen companies like Super Micro Computer gain attention due to their involvement in Nvidia-based AI server clusters. The inclusion of Super Micro Computer in the S&P 500 after a swift rally underscores the significant market impact of this renewed meme-stock activity. Other companies, including B. Riley Financial, Spirit Airlines, Tilray Brands, and Smart for Life, have emerged as new targets for meme-stock traders, indicating a diversification of interest within this investor community.

Impact on Short Sellers and Market Dynamics

The recent meme-stock rallies have led to substantial losses for short sellers, particularly in cases like GameStop, where short interest reached its highest level since 2022. According to Ortex Technologies, short sellers have incurred over $2.3 billion in losses for May alone, with many yet to close their positions. This scenario echoes the short squeeze events of January 2021, demonstrating the significant influence of retail investors' coordinated actions against short sellers. The rallies have not only affected the primary targets like GameStop and AMC but have also impacted other companies, indicating a broader market effect driven by retail investors' appetite for risk and collective action.

Street Views

  • Bruce Richards, Marathon Asset Management (Bullish on AMC Entertainment Holdings Inc. debt):

    "We’re earning 15% senior secured liened up against all their assets" and have all the downside protection that debt provides, thanks to Roaring Kitty and all the meme fan club that is buying AMC."