Mudrick Capital Gains $200 Million on AMC, GameStop Bets

Jason Mudrick’s hedge fund reaped almost $200 million on its stakes in firms that skyrocketed during a Reddit-fueled trading frenzy in recent weeks, according to people familiar with the matter.

Mudrick Capital Management earned 9.8% in January, one of its best months ever, making the bulk of its gains on debt and equity options of AMC Entertainment Holdings Inc., said the person, who asked not to be identified because the information isn’t public. The firm also profited from the volatility in shares of GameStop Corp.

The $3.1 billion hedge fund booked most of the gains on its debt holdings in AMC and about $50 million selling out-of-the-money call options on the stock last week, the person said. The shares surged more than 500% in January before retreating sharply Tuesday. Mudrick also profited by selling out-of-the-money call options on GameStop, the person said.

A spokesman for New York-based Mudrick declined to comment.

In December, AMC signed a commitment letter with Mudrick Capital that called for the hedge fund to buy $100 million of new secured bonds that pay 15% cash or 17% deferred interest. In exchange, Mudrick received a commitment fee equal to about 8 million AMC shares.

The deal also called for the firm to exchange $100 million of AMC bonds due 2026 for about 13.7 million shares. Mudrick sold those shares when they were trading at $3 to $4 apiece, the person said.

Jason Mudrick, who previously worked at Contrarian Capital Management, founded his firm, which specializes in distressed-debt investments, in 2009. It is expanding further into Europe with the takeover of a credit hedge fund previously run by CVC Credit Partners.

Read more: Mudrick Capital to Take Over CVC Global Credit Hedge Fund

Once-risky debt investments tied to AMC reaped big gains after day traders helped fuel the recent stock surge. Mudrick bought AMC’s second-lien bonds for 7 to 20 cents on the dollar, the person said. Those securities rose to about 70 cents last week. The hedge fund also owns a position in AMC’s secured debt.

Mudrick Capital Gains $200 Million on AMC, GameStop Bets

Silver Lake Management also profited from its involvement in the troubled cinema company. Last week, the private equity firm sold its AMC stock, generating about $113 million after converting bonds to shares and selling them into the rally.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.