AMC Looks Less Like a ‘Cult Stock’ and More Like an Actual Cult

Shares of companies thin on bullish fundamentals, but which still enjoy a devoted, vocal base of shareholders, have long been know as “cult stocks.” These days? Some of these groups of investors are starting to look more and more like, well, actual cults.

In the house of mirrors that one enters amid a social-media-fueled frenzy to pump up a stock like AMC Entertainment Holdings Inc., it can be almost impossible to know what’s genuine, organic enthusiasm for a company, and what is bought and paid for by newly enriched day traders.

Still, whatever is inspiring some of the antics involved in the pumping of AMC, one thing is certain: It’s getting very strange. In some ways it even seems to rhyme with the conspiratorial musings of the QAnon proponents and other social-media-induced movements that have cropped up in recent years.

“If you’re a fan watching a sports game, you can cheer for your team, but you’re not sure how much that really affects the team,” said Dan Egan, managing director of behavioral finance and investing for robo-adviser Betterment. “When it comes to the stock market, you can feel like you’re part of the community making this thing happen. That’s the cult part: It gives you the feeling of being part of something, being part of the community. And that can be very addictive.”

In one snapshot that was tweeted, two people with remarkably big grins purportedly on a street corner in Boulder hold signs promoting AMC that bear a resemblance to the “The End of the World Is Nigh”-type of placards one sees from time to time.

Another tweet from an anonymous frequent commentator in the “Fin Twit” arena describes chain-letter-like messages from friends and family urging the recipients to buy AMC -- which trades just above $50 -- and hold until it gets to $1,000.

A search for “$AMC cult” on Twitter is illuminating. “When I noticed the $AMC cult following I decided to buy in lol,” reads one tweet. “I never seen strangers share this kinda faith.” “Alright man i joined the $AMC cult at 40.35,” reads another.

Add in a dash of anti-establishment “stick it to The Man” ethos, like the investors in GameStop Corp. and other meme stocks who explicitly wanted to burn the hedge funds that were short the shares, and the recipe is complete.

“This is an interesting sequel to the Wall Street protests going on in 2008,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors. “Before, it was much more, ‘let’s camp out.’ Now they’ve said, ‘we’re going to take the battle to you guys and go into the markets and disrupt them.’ You’ve heard these occasional stories on Reddit that say, ‘I don’t even care if I lose money, I just want to stick it to Wall Street.’”

Of course, some of the promotion also looks more like just silly fun: A short video that has gone viral shows models dancing poolside under a palm tree, each holding a big, red cardboard sign that together spell out “AMC 2 MOON,” the popular other-worldly destination for stocks and cryptos getting the full pump treatment.

In a way, it highlights how social media outlets have proven to be the boiler rooms of the modern era. Yet instead of dialing numbers one by one, stock promoters are able to blast their unfiltered messages to thousands or millions of potential bag holders all at once.

“The social media network-effect is especially powerful but even more dangerous in the stock market,” said Michael O’Rourke, chief market strategist at JonesTrading. “Market participants whose due diligence is limited to popular social media influencers are likely to see their short-term successes turn into long-term failure.”

With audiences way larger than any boiler-room boss ever dreamed of, the results from these promotions are also outsized. AMC ended 2020 at $2.12. At its intraday high Wednesday, it was trading 3,325% above that at $72.62.

Yet, if this were a movie being shown on one of the more than 10,000 AMC screens worldwide -- preferably one of those dine-in theaters with the comfy leather recliners and serving those delicious Southwest rice bowls, thank you very much -- no one would believe it.

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