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It’s been a few months now since Reddit took Wall Street by storm by pumping GameStop stock with some serious cash. It was enough to raise the stock price a couple thousand percent which did some serious damage to some hedge funds at the time. Although it seemed that most of these hedge funds acquired enough cash to cover their losses, Reddit was still able to send Wall Street a message.
Reddit taking aim at Wall Street
Wall Street has long been thought of as a rich man’s game. Something that rich people use to get richer and the way they do so is by supporting companies that oppress the poor. The more the companies oppress, the higher the profit, the higher the stock price. Of course I’m being overly cynical but Wall Street is cynical. While there are companies that focus on the exact opposite, it is easy to find companies who only care about raising their stock price, even at the cost of their morality.
This doesn’t also mean that Reddit is without its moral issues. But in the grand scheme of things, it’s done a lot more for poor people than Wall Street has ever done. So Reddit rallied behind GameStop at the start of the year and were able to help the little guys in the process of giving some hits to the big guys. What’s their next move? Well that’s what everyone’s been wondering for a while now.
The perfect storm for GameStop
The first backing of GameStop was the perfect storm. Less wealthy people have had to stay inside more due to the pandemic and many of them had receive extra income checks from the government. Of course some people had to use that for necessities but others were fortunate enough to invest that money. So they did what most people did when they have a question, they went to Reddit.
Thus, the GameStop pump was born. But now it’s a bit harder to replicate. Especially with RobinHood seemingly being against this kind of movement. There are a lot more people on Reddit trying to “persuade” people into investing in a stock that they currently own promising that the price will go way higher. Many people have fallen for this, others have not. Because of this, there is no longer a sense of community and that sense of community was what took the GameStop stock to the moon. They all trusted each other and it all worked out for those that bough in early.
AMC trying to replicate the same success
So where does that leave AMC? It’s been rising sure, but that can be mostly attributed to the company flashing good signs rather than people on Reddit trying to pump it. The company just attained a ton of money from selling a good portion of its stock so they can weather the storm a little bit better if there are any issues with reopening the US in the next couple of months. And investors are optimistic now that a majority of movie theaters are open to the public.
AMC has always shown volatility since it is a high cash-flow business so that shouldn’t be surprising that these factors were enough to drive up the price quickly and drastically. I would not bet on AMC if my only reasoning is that Reddit is telling me to or that it is trending on Twitter which it has been in the last couple of days. I would bet on it if you think theaters can make a comeback. My piece of advice, AMC was on a downward trend before the pandemic so if something happened during the pandemic that would change this, then it would be a good bet.
AMC thoughts
I would say though that this is the most unified I have seen the Reddit community since the GameStop pump so does seem like the next stock chosen to go to the moon.
*DISCLOSURE: This is an opinion piece and I am in no way guaranteeing any returns or predictions that I make. All investors should conduct their own research before investing in anything. I do not own and do not plan to own any stocks or options in AMC at the time of publishing this article.
