What does the world’s largest movie theater chain do after the COVID-19 pandemic has battered its business for two years? Buy a gold mine!
It’s a puzzling investment by AMC Entertainment Holding, whose management has no experience in the gold business. Even so, AMC’s Chairman and CEO Adam Aron described the step as a “bold diversification move.” The theater company agreed to pay $28 million for 22 percent of Hycroft Mining Corporation, which has teetered near bankruptcy, though it owns a large mine in northern Nevada with an estimated 15 million ounces of gold deposits. Precious metals investor Eric Sprott also purchased a 22 percent stake in Hycroft as part of the deal.
What AMC does bring to the table is experience in walking a financial tightrope. AMC’s Aron said his management team has “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.”
AMC became a so-called “meme stock,” widely followed by individual investors online who enthusiastically snapped up new shares of the company during the pandemic, providing a financial lifeline for the theater chain.
One of AMC’s investors, hedge fund manager Jason Mudrick, also held a position in Hycroft, and initiated contact with AMC management, leading to the investment, according to The Wall Street Journal.
AMC’s Aron said the company is “playing on offense again,” predicting that, “our efforts here will be quite lucrative for AMC shareholders.”