AMC stock: Warning of price inflated

AMC warns investors

AMC's filing on Thursday also does not obligate the company to sell additional shares now or at any time. It merely allows AMC to reserve the right to sell stock. 

This filing is also full of all kinds of caveats that amount to AMC telling investors, "Do not buy our stock right now."

"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," the filing said. "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 emphasis on this passage is the company's.  

The filing goes on to discuss short squeezes, social media, retail trading platforms and a host of other factors that AMC believes might be driving volatility in its share price. And for all of this, AMC reiterates time and again, the company is not responsible and offers no assurances to existing or prospective shareholders that any of this makes sense or will last. It is a filing unlike any we can remember reading. 

But the logic for a company to issue stock or pursue other initiatives when its stock prices goes nuts simple: as the price of your stock rises, the cost of raising capital falls.

For example, AMC's filing to issue 11.5 million shares on Thursday could, at current market prices of ~$60 per share, raise some $690 million for the company. Had the company sold 11.5 million shares at the beginning of May when shares were trading at around $10, however, that stock sale would've netted just $115 million to the company.

In general, selling stock is something companies would rather not do as it punishes existing shareholders by reducing their ownership stake. By doing nothing but watching the internet get interested in AMC memes, however, the company can now raise an additional $575 million and inflict no more pain on existing shareholders than it would have in early May. For a management team, this move is a no-brainer. The market is basically begging you to issue more stock at these prices.

And this shrewd move from AMC to sell stock into a wild market and then list caveat after caveat offers a clear blueprint to the teams over at companies like Bed, Bath & Beyond (BBBY), Express (EXPR), and BlackBerry (BB), all of which saw their share price rise more than 30% on Wednesday. 

If you're leading a company that gets involved in a meme stock moment, however, it is getting increasingly harder to say — as Bed, Bath & Beyond Mark Tritton did to Yahoo Finance on Wednesday — that "today's activity is just a day in time." 

Because in the meme market, today's activity is an opportunity, an opening, a calling from the markets to make something happen. Carpe diem indeed.