You would not expect an executive to benefit from being caught with his trousers off.
But when AMC chief executive Adam Aron was interviewed by a YouTuber last summer wearing a shirt, tie and, apparently, just his underwear, it merely fuelled trader enthusiasm in one of the hottest meme-stocks of the year.
Since stock in the world’s largest cinema chain first rocketed, Aron has become an ebullient force for shareholder engagement, repeatedly mining AMC’s meme-stock status to raise more than $1.8bn to recapitalise the company as it battled Covid-19 closures. He even became a meme himself.
His latest move was to announce this week that the cinema operator was taking a 22 per cent stake in Hycroft, a struggling microcap gold mine popular with traders on sites such as Reddit.
Neither he nor AMC have experience in commodities but AMC’s share price rose 6.8 per cent on the day of the announcement, while Hycroft’s closed up 9.4 per cent having surged as high as 96 per cent. The miner is up more than 125 per cent since the start of the year.
Aron took to Twitter to say how much he was enjoying the new gold-themed AMC memes following the company’s “bold diversification move”. “Since our Hycroft investment, a new genre of memes is coming in,” he wrote. “They made me laugh. You gotta laugh in life.”
Yet Aron’s approach to weathering the pandemic is no joke. “This has always been about marketing,” said Chad Beynon, an analyst at Macquarie. “He is trying to save the company.”
Such views are not universal, however, particularly since Aron offloaded more than $42mn of his own AMC shares at bloated valuations. “He is not an industry player,” said the head of one competing chain. “He does what is right for Adam Aron. He doesn’t even do what is right for AMC.”
A Philadelphia native, Aron began his career in the marketing department at PanAm airlines, before going on to lead the marketing teams at Hyatt hotels and United Airlines. He then cruised through the leisure and entertainment sectors as the chief executive of Norwegian cruise line Vail Resorts — which he quickly scaled and took public — and Starwood Hotels, among others, before taking the helm of AMC in 2016.
“He wasn’t cinema born and bred, which a lot of cinema people are,” said one former AMC executive. “He was very optimistic — big plans, big ideas. You would hear people in the room go, ‘really?’ . . . And he would say, ‘yes, we can do this’.”
Against the streaming boom, cinemas were already struggling to compete before the pandemic. Then Covid-19 dealt a body blow. Screens around the world were forced to close and almost the entire roster of Hollywood blockbusters were postponed.
At the start of 2020 AMC had more debt — in excess of $4.5bn — than any other cinema chain, and was haemorrhaging $100mn-plus a week once lockdowns set in.
It was the chain most expected to fall into bankruptcy, analysts said, and its stock was heavily shorted. At various points during the pandemic, AMC was “one to two months away from completely running out of cash”, according to Jawad Hussain, an analyst at SP Global.
The meme-stock craze marked a spectacular reversal of fortune, with AMC’s share price uncoupling from its poor fundamentals to rise 2,400 per cent in weeks.
The head of the rival group said it was as if Aron “had won the lottery without buying a ticket”, while Hussain said that “without the substantial equity raises made possible by the stock price increase, this business would be in a much worse position”.
“We try every day to seize on opportunities to help make AMC a stronger company,” Aron said, adding that the company was “very grateful for the support” of the “millions of investors who found our company intriguing and who were passionate about it”.
Aron was paid $21mn in 2020, more than double the year before. Almost $15mn of that was in stock awards. But he still has a large stake in the company and insisted it was in his interest for it to succeed.
After the meme-stock mania fundamentally changed AMC’s ownership structure from 10 per cent retail investors to more than 80 per cent, he realised he needed to speak directly to his new shareholders. There are now 4m of them.
Aron’s courting of the self-styled Apes, the Reddit set who call Aron “The Silverback”, has been deliberate. In May 2021, he disclosed that he was donating $100,000 to a charity to protect endangered mountain gorillas.
Aron’s June announcement that shareholders could receive free popcorn at its cinemas briefly doubled AMC’s share price and was less about bringing people into theatres and more about attracting new investors.
Some industry analysts have stopped covering AMC, according to one “because it is no longer trading on fundamentals”. They say AMC’s share price is now more closely linked to Aron generating online buzz than to the cinema chain’s ability to pay down its debt or update its theatres.
AMC shares are down more than 75 per cent from their peak last year and the many retail investors who bought at the height of Aron’s hype have lost money.
During a share sale in June AMC cautioned shareholders that they should not invest unless they were “prepared to incur the risk of losing all or a substantial portion” of their investment. The following month Aron was forced to scrap plans to issue more than 25mn new shares to raise an addition $1bn after retail investors pushed back against the dilution.
It is uncertain whether Aron’s approach as a marketer will continue to benefit AMC or if he can convert his troop of retail shareholders into cinemagoers. But his willingness to harness the meme-stock windfall could still prove decisive.
“A lot of bosses in cinema and otherwise would run to the back of the room,” said the former AMC executive. “But Aron will always lead from the front.”
Source: Financial Times