Meme Stock AMC Is Offering Its Investors Popcorn. How Fitting!
(Bloomberg Businessweek) -- On June 2, AMC Entertainment Holdings Inc. announced it will offer a free large popcorn to investors in its shares the first time they attend a movie in an AMC theater this summer. This is wonderful on two levels. First, because it may be the only thing of actual value that the shareholders ever receive for their money. And second, because popcorn is the perfect metaphor for AMC shares, as I will explain below at some length (ahem).
Bloomberg reporters have been all over the story of AMC’s soaring stock price, which, as of a one-day gain of 95% on June 2, made the company more valuable than Delta Air Lines Inc. (not to mention higher-flying). They’ve pointed out that analysts expect the company to lose $100 million over the next 12 months in earnings before interest, taxes, depreciation, and amortization. They’ve noted that AMC has negative shareholder equity—not just small; negative—and cited analysts such as Mark Levin of Asterisk Advisors, who wrote, “It is clear that fundamentals don’t support common stock levels at all (which makes sense for the Reddit crowd).”
Rather than recapitulate all that, let me write about the other kind of popcorn, the kind that comes from ears of corn. One can’t read the Wikipedia entry for popcorn without feeling an eerie resonance with AMC. Some excerpts:
A popcorn kernel’s strong hull contains the seed’s hard, starchy shell endosperm with 14–20% moisture, which turns to steam as the kernel is heated. Pressure from the steam continues to build until the hull ruptures, allowing the kernel to forcefully expand, from 20 to 50 times its original size, and then cool. (That’s the AMC story: Investors kept turning up the heat until the shares forcefully expanded.)
When the popcorn has finished popping, sometimes unpopped kernels remain. Known in the popcorn industry as "old maids," these kernels fail to pop because they do not have enough moisture to create enough steam for an explosion. (A metaphor for the meme stocks that never managed to blow up. Sad.)
Some shipping companies have experimented with using popcorn as a biodegradable replacement for expanded polystyrene packing material. However, popcorn has numerous undesirable properties as a packing material, including attractiveness to pests, flammability, and a higher cost and greater density than expanded polystyrene. (Popcorn, like shares of AMC, has little value except as a guilty indulgence.)
AMC’s marketing people almost certainly didn’t have any of this in mind when they launched the popcorn promotion. How perfect, though. To the moon!
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