Meme stock AMC takes surprise stake in metals miner Hycroft

US cinema chain AMC, which was at the centre of the pandemic-fuelled ‘meme stock’ phenomenon, has put its cash to work with an unexpected investment in a precious metals miner.

AMC Entertainment revealed on Tuesday it has taken a 22 per cent stake in gold and silver producer Hycroft Mining for $27.9million, with management confident it can use its experience in recent years to improve the fortunes of the embattled firm.

The investment is made in partnership with Eric Sprott, a leading gold and silver investor, who will match AMC’s commitment of $27.9million.

Shares of US-based Hycroft, which owns the 71,000 acre Hycroft Mine in northern Nevada, jumped nearly 89 per cent in pre-market trading upon the announcement.

Investment firm Mudrick Capital Management is currently the firm’s largest shareholder, holding a 40.38 per cent stake, according to Refinitiv data.

AMC Entertainment will receive an additional 23.4 million warrants in Hycroft at $1.07 per share, and chairman and CEO Adam Aron said the investment came after the firm spotted ‘a company in an unrelated industry that appears to be just like AMC of a year ago’.

He explained: ‘It, too, has rock-solid assets, but for a variety of reasons, it has been facing a severe and immediate liquidity issue. 

‘Its share price has been knocked low as a result. We are confident that our involvement can greatly help it to surmount its challenges — to its benefit, and to ours.

‘To state the obvious, one would not normally think that a movie theatre company’s core competency includes gold or silver mining.

‘In recent years, however, AMC Entertainment has had enormous success and demonstrated expertise in guiding a company with otherwise valuable assets through a time of severe liquidity challenge, the raising of capital, and strengthening of balance sheets, as well as communicating with individual retail investors.

‘It is all that experience and skill that we bring to the table to assist the talented mining professionals at Hycroft.’

Additionally, Aron highlighted the liquidity boost the investment would bring to the miner.

He said: ‘As I have been saying repeatedly since last June, investors should think creatively and boldly about AMC‘s future, because within the company, we ourselves have been thinking creatively and boldly about our future.’

AMC shares were up 2.3 per cent in early US trading at $13.64, but remain down 47.7 per cent year-to-date.

In May last year, the shares surged nearly 420 per cent in a matter of days from around $12 to more than $60 as retail trader rushed to invest.

AMC CEO and chairman Adam Aron says the firm’s experience can help the miner

Commenting on AMC’s investment in Hycroft, senior investment and markets analyst at Hargreaves Lansdown Susannah Streeter said: ‘AMC Entertainment has been blessed with newly deep pockets all thanks to the meme stock trend which saw its share price soar, and it’s now splashing that cash, and is willing to take the plunge into other sectors.

‘It’s already investing in giving its cinemas a high-tech makeover, and is also pouring cash into a popcorn venture, and it clearly believes that over-investment in the entertainment industry is not the best strategy given the intense competition from streaming giants disrupting the industry.

‘A movie theatre chain wouldn’t ordinarily be expected to cosy up next to a precious metals miner, but management see a spark of synergy with embattled Hycroft and believe experience of steering AMC through its pandemic rollercoaster ride, could benefit the company.

‘Although this offers diversification for AMC, the investment clearly comes with risk, however by also teaming up with precious metals investor Eric Sprott there will be expectation that he’ll bring the sector experience to help turn the miner around.

‘For Hycroft investors AMC’s involvement already marks the start of a legendary chapter with shares surging in a replica spurt of the meme stock trend, but its highly uncertain as to whether there will be a fairy-tale ending to this investment.’