Meme Meme On The Wall, Is AMC Set Up For A Fall?

Published on: 06/15/2021

In this edition of Chart Talk, Tony Ogorek and Jeff Viksjo discuss meme stocks, specifically AMC.

TRANSCRIPT:

TONY:

Hi my name is Tony Ogorek, I’m here with Jeff Viksjo, and today we are going to be talking about meme stocks, and specifically AMC.  Jeff, a lot of people hear the term meme stock and they don’t know what it means.  Why don’t you give us a little primmer on what these stocks are all about?

JEFF:

So typically you buy a stock because you think its business prospects are going to improve. So, the stocks are going to be worth more in the future than it’s worth today.  These meme stocks really, everyone’s buying them just because someone on a message board told them to.  It’s not even clear who’s writing this, they may be anonymous.  It’s not exactly clear why they pick these certain targets, like AMC and GameStop.  But it’s clear that this is basically a Ponzi scheme out in the open.

TONY:

Yeah and the remarkable thing is that when you look at the Reddit boards and some of the other message boards, and the number of people who are on those and basically investing their money based on rumors.  It’s just spectacular.  You see what happens exactly with AMC, where the price has gone from next to nothing, a couple of bucks, up to $30 a share.  Let’s look at this chart and just look at market cap.  What do you see here?  I mean, this is just something we just are not used to seeing here.

JEFF:

Yeah and we’re looking a chart of AMC entertainment, this is movie theatres. Believe or not just since the start of this year, so 6-months’ time, the market cap has gone from about $400 million to $30 billion.  That’s a return of about 2,500%.  And of course what doesn’t make sense, just to make clear how much this doesn’t make sense, is AMC is now worth about 8 or 9 times what it was worth before the pandemic, when people were actually going to the movies.

TONY:

Jeff, this reminds me of when I was teaching.  If you had a kid, they got the right answer, but their work was a disaster, you had no idea how they got there.  You wouldn’t give them a good grade.  Same thing’s happening here.  Just because the stock has gone up remarkably, doesn’t mean anyone understands what’s going on because it’s completed divorced from any kind of economic reality.  So, that’s our take on AMC. 

Hopefully you’ve enjoyed this edition of Chart Talk, and we’ll look forward to seeing at our next talk.

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