In a plot twist no one saw coming and many find scarcely believable, the world’s largest cinema chain has become an investor in a gold and silver mining company – the struggling owner of a single gold and silver mine at that. This wasn’t in the script.
Except it is now. AMC Entertainment – since 2016 the parent company of Odeon Cinemas, which has 12 multiplexes in Ireland – has acquired a 22 per cent stake in Hycroft Mining for $28 million (€25 million). The silver screen is no longer enough. A silver mine is the shiny new addition to the AMC portfolio.
People either don’t understand what is going on with this acquisition and are shaking their heads, whispering to the person beside them for an explanation, or they understand it exactly – and are still shaking their heads. Did AMC management get lost trying to find their seats in the dark?
AMC chief executive Adam Aron, declaring the investment a "bold diversification move", duly posted pictures of himself in safety gear in the Nevada desert – an apocalyptic movie set of a place where Hycroft ceased mining operations last November, lacking the finance to construct a mill for silver sulphide and gold ore processing.
“It has 15 million ounces of gold resources! And 600 million ounces of silver resources!” Aron nevertheless tweeted excitedly.
Even when cinemas were permitted to reopen, box offices were kept subdued by restricted capacities, the holding back of exclusive top-drawer product and ongoing virus wariness among the public
That he had zero co-stars in this publicity burst did not go unremarked upon, and the next day he followed up by posting one with his arm around Hycroft president and chief executive Diane Garrett, claiming it was “especially satisfying to be backing a female-led management team”.
AMC’s “expertise” would help them “bolster their liquidity”. So what expertise would that be then? It could hardly be silver related. Standard projection screens haven’t been coated in silver for a long, long time. No, it would be its recently gained “meme stock” expertise, now a part of Aron’s personal brand.
Back story
The back story here would test any screenwriter eager to avoid dumping vast chunks of exposition on the audience, but suffice to say that AMC, having entered the pandemic with high debts, did not have a fun 2020.
First the major studios postponed their tent-pole releases; then, with cinemas forced to shut during lockdowns, they decided to debut several of them on their new streaming platforms. Even when cinemas were permitted to reopen, box offices were kept subdued by restricted capacities, the holding back of exclusive top-drawer product and ongoing virus wariness among the public.
Hedge fund managers shorted AMC’s stock, meaning they took bets that its share price would plummet further. They thought AMC was in trouble, and, at the time, it was.
This colossus of cinema, with about 950 sites and 10,500 screens worldwide, was on the verge of running out of money, only swerving bankruptcy in January 2021 after it raised a $917 million (€831 million) finance lifeline. But its real saviour came soon afterwards in the surprising shape of Redditors.
Egged on by a forum on the site Reddit (aka a subreddit) called WallStreetBets, individual retail investors used accessible trading apps to pile into stocks that hedge funds were shorting, sending their share price soaring and creating a "short squeeze" whereby the hedge funds must also buy shares in the stock to cover the mounting losses on their short positions.
GameStop became the most notorious target for participants in the meme stock craze, but AMC was another and Aron acted as if he couldn’t have been more thrilled. In recognition of AMC’s new class of investor, he courted the self-named “apes” on Reddit by making a donation to a charity protecting mountain gorillas, announcing shareholders could have free popcorn and accepting cryptocurrencies as payment in US theatres.
Its share price may have headed south since the delirious peak of the meme stock frenzy, but AMC was smart enough to lock in the benefits, with strategic stock sales throughout 2021 allowing it amass a $1.8 billion (€1.6 billion) war chest. In this context, throwing $28 million (€25 million) at a mine is loose change – cause for arched eyebrows, not sleepless nights.
At next Sunday's Oscars ceremony, some winners will inevitably hail the big screen experience as special or magical or unique
There's nothing wrong with diversification, obviously. AMC's majority owner from 2012 until a year ago was China's Wanda Group, a conglomerate intent on putting its toe in the door of industries from healthcare to luxury yacht manufacturing. All manner of corporations maintain investment strategies that can feel incongruous to their primary activity, but are still sensible.
And yet there is something about Aron’s gleeful adoption of Hycroft in AMC’s post-Wanda era that seems off. Certainly, it does nothing for the narrative that AMC’s own Covid-interrupted, streamer-disrupted industry is poised for a stellar post-pandemic recovery.
Random path
Time was that cinema chains, coining it from the popcorn margins alone, were sitting on metaphorical goldmines. They didn’t need literal ones. And they definitely didn’t need a “strategic” investment in one prompted by the random intervention of Redditors.
At next Sunday’s Oscars ceremony, some winners will inevitably hail the big screen experience as special or magical or unique. Such awards show messages used to be smug and self-congratulatory, then their tone became defensive. The subtext that streaming undercuts both the art and the business model of film was barely a subtext anymore.
Lately, if these statements are not apologetic, they’re defiant. The streamers used to be Hollywood’s “other”; now they are very much in the room.
Of course, it is the chief executive of the world’s largest exhibition company whose day job it is to be cinema’s biggest cheerleader. And Aron, whose background is in the aviation, leisure and hospitality sectors, did say last week that AMC remains “passionately committed to orchestrating a full recovery from Covid impacts on the cinema industry”.
Still, it has found time for a cameo in the mining business, while auditioning for the self-penned role of King of the Meme Stocks. That is surely neither a happy ending, nor the glittering path to one.
