Adam Aron, President and CEO of AMC Entertainment.
David Orrell | CNBC
Movie theater chain AMC Entertainment has agreed to acquire a large stake in a Nevada-based gold mining company, the companies announced Tuesday, in an unusual expansion for a one-time meme stock.
AMC will spend $27.9 million in cash on the deal, receiving approximately 23.4 million shares of Hycroft Mining Holding Corp. and the same number of share warrants. The deal would make AMC a roughly 22% stake in Hycroft.
Hycroft shares nearly doubled in premarket trading. AMC shares, which have fallen 50% this year alone, are up 3.2% in premarket trading.
AMC CEO Adam Aron, in a post explaining the move, mentioned the recent success of the theatrical releases Spider-Man: No Way Home and The Batman, as well as positive box office projections for this year. He also drew parallels between his company and a miner.
“Our strategic investment announced today is the result of finding a company in an unrelated industry that looks exactly like AMC did a year ago,” he said. “She also has solid assets, but for a number of reasons she has faced a serious and urgent liquidity problem. As a result, the price of its shares fell to a minimum. We are sure that our participation can help her a lot. overcome its difficulties – to their benefit and to ours.
AMC stock was one of the top meme stocks last year, rising sharply as an army of retail investors bought shares in companies that had been heavily cut by hedge funds. Aron accepted new shareholders, including offering popcorn deals to the company’s owners.
The company has also used its newfound popularity to raise billions in additional capital, and Aron said some of that money will be used for strategic acquisitions. Aron sold his own shares of AMC for tens of millions of dollars, which he attributed to property planning. AMC is also experimenting with a new pricing model that charges higher fees for certain films.
In addition to AMC, a similar number of Hycroft shares and warrants are being bought by metals investor Eric Sprott. Hycroft said in a statement that investment firm Sprott Private Resource Lending II has agreed to extend the maturity of its debt to May 2027 from May 2025.
According to the securities filing, the deal will no longer require Hycroft to make regular principal repayments on that debt, and is instead expected to pay off everything in one bullet payment in 2027.