As the latest update in the stock purchase frenzy brought on by Reddit users, AMC Theaters stock has dramatically skyrocketed almost 300% in a matter of days — saving the company from its recently filed bankrupt status. Private equity firm Silver Lake has sold all of its position in the theater chain following the development, Deadline reports. Before this, Silver Lake sold shares at between $14 and $24 per share.
After AMC's backer, China's Wand Group, lowered its stake in 2018, it left $600 million in convertible notes. Silver Lake then transferred the $600 million in AMC debt into equity and then sold the shares on the open market, raking substantial profit. AMC Entertainment's shares shot up 53%, with the recent Reddit stock boom inciting heavy trading volume and leaving AMC at $13.19 on Friday night.
In an attempt to regulate volatility, online traders like Robinhood closed trading on various stocks, including AMC and Gamestop, which led to several investors filing class-action lawsuits against the company. One such lawsuit filed by attorney Alexander G. Cabeceiras alleges that the Robinhood "purposefully, willfully, and knowingly removing the stock 'GME' from its trading platform in the midst of an unprecedented stock rise, thereby deprived [sic] retail investors of the ability to invest in the open-market and manipulating the open-market." Cabeceiras went on to allege the company's mission statement, "democratize finance for all," is a farce, saying that "this is simply not true." The lawsuit is seeking reinstatement of $GME trading to the platform, as well as a class action fee for plaintiffs, punitive damages, attorney's fees.
Billionaire Mark Cuban also responded to Robinhood's closure of trading, saying, "In terms of shutting it down, there's going to have to be a lot of explanations from Robinhood and from other online trading companies and apps on why they're shutting down," he said. "Their explanation that 'well, we're just trying to balance out the market or deal with volatility' just doesn't hold water at all and there's got to be a bigger reason behind it."
The SEC has responded to the actions saying it will investigate. "We will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws," the regulatory body said in a press release.