At first glance, it seems quite peculiar, but AMC Entertainment Holdings Inc's (NYSE:AMC) recent investment in Hycroft Mining Holding Corp (NASDAQ:HYMC) makes more sense below the surface.
There were a lot of unknowns in terms of how the market would interpret the acquisition, but that didn't stop AMC from pursuing the opportunity.
"There was one thing that we were certain of: we were going to make a lot of money," AMC Entertainment CEO Adam Aron said Monday on CNBC's "Squawk On The Street."
AMC has shifted its focus to not only reviving the AMC of old, but also toward transforming its business after retail investors likely saved the company from bankruptcy and, moreover, gave it enough capital to play offense.
Why Hycroft? Management has been tasked with finding appropriate ways to put the company's sizable cash position to work. Looking into the opportunity with Hycroft Mining, AMC saw an iteration of its past self.
"In Hycroft, we found a company that was exactly like AMC a year ago," Aron said. "It had great assets, in this case silver and gold in the ground, millions of ounces, but it had a cash squeeze, it had a liquidity problem."
In the same way that AMC raised money to survive, the company has helped raise $195 million for Hycroft in just two weeks since the deal was announced, Aron explained. "It is already a huge success story," he added.
Executing The Strategy: With the money raised from retail investors, AMC said it would work on growing its core theater business, pay down its debt and begin looking for transformational M&A opportunities. After expanding theaters and paying down debt, the company did what it said it would do by purchasing a stake in Hycroft, Aron said.
"The market response to the AMC investment in Hycroft was very positive, both for Hycroft and for AMC," he said.
After reviving its own business through retail investor interest and aiming to do the same for Hycroft, the AMC Entertainment CEO is surprised other companies haven't become more involved with their retail investing communities.
"I am amazed now that others have not followed in our footsteps," Aron said. "It's so important to talk to your shareholders, to talk to investors, to listen to your shareholders, to listen to investors. I do think this is the wave of the future."
AMC Price Action: AMC Entertainment has traded between $8.31 and $72.62 over a 52-week period.
Benzinga Pro reports the stock was up 28.44% at $25.99 at the time of publication.
Photo: Eden, Janine and Jim from Flickr.
