This Isn’t Your Grandfather’s Mania

AMC isn’t worth $30 billion. You know it, people buying the stock know it, and even AMC’s management team knows it. Here is what they said in a recently filed 8-K.

We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business,  or  macro  or  industry  fundamentals,  and  we  do  not  know  how  long  these dynamics  will  last. Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.

The company told investors that they are going to sell shares from time to time. They also told investors, and I’m paraphrasing here, that they would be crazy to buy them. I don’t know that we’ve ever seen anything like this before from management.

But not too long ago, way back in January, we saw something very similar with the stock. In the first 17 days of 2021, AMC gained over 800%.

And then, predictably, the music stopped, and prices crashed.

I have no explanation for why this stock is reinflating, but I think we’ve lost the script. When dumb moves happen in the market, and this is certainly that, people point to retail investors. Small money might have lit the match, but big money is pouring gasoline on the fire.


People are drawing comparisons to 2000, but this is very different. First of all, the mania is limited to just a handful of names. In the dot-com bubble, this was happening every day with a different name(s). The other difference is that, unlike back then, nobody actually believes these companies are “worth” whatever their current market cap is. Everybody knows AMC’s business isn’t worth $30 billion. But that doesn’t mean the stock isn’t worth $55. The only thing that matters is what the next person machine will pay for it. Buyers are just playing a game with tickers on a screen. The madness can continue as long as people think they can get out before the collapse.

“Well then they’re just gambling,” you’re probably thinking. OF COURSE THEY’RE GAMBLING. So if we can agree on that, then it’s easy to make a case for why stocks are their vehicle of choice. When you buy a lottery ticket, you expect to lose 100% of your money. AMC was up 100% yesterday! I’m not saying it’s smart, but I certainly can understand.

The silly videos on Tik Tok will continue to get all the attention, but I’d bet the vast majority of speculators are being relatively responsible with their money. This isn’t a mob of crazed maniacs putting their life savings on the line. And again, let’s not forget that at this point, retail is a sideshow.

Millions of people are playing musical chairs, and there’s only a handful of seats. When the music stops, prices will come crashing down. Forgive the cheese, but we’ve seen this movie before, and we know how it ends.