🍿The Love Triangle of $AMC, Mudrick & Goldman Sachs🍿
@CEOAdam is a marketing savant who just dumped long-time partner $GS for a hot date w/ Mudrick Cap.
Result: a $230M private placement deal & free🍿
What's the backstory? How did this wallflower fund spur AMC's big rally?
👇
@CEOAdam is a marketing savant who just dumped long-time partner $GS for a hot date w/ Mudrick Cap.
Result: a $230M private placement deal & free🍿
What's the backstory? How did this wallflower fund spur AMC's big rally?
👇
1/ ICYMI
June 2. AMC closes @ $62, up 3000% YTD. News is flashing: "Mudrick buys 8.5M new shares, dumps in 24 hrs!"
🤨That’s strange, u say. Why is a hedge fund leading an equity offering?
🧐U then dig up their wiki. Lo & behold its a debt fund! Even weirder. Wuts goin' on here?
June 2. AMC closes @ $62, up 3000% YTD. News is flashing: "Mudrick buys 8.5M new shares, dumps in 24 hrs!"
🤨That’s strange, u say. Why is a hedge fund leading an equity offering?
🧐U then dig up their wiki. Lo & behold its a debt fund! Even weirder. Wuts goin' on here?
June 3. AMC prints another 11.6M shares. Stock tanks 30% on fear of dilution! Currently @ $45
🙄 Ok now this is just confusing. Why didn't anyone cry "dilution" yesterday when the first 8.5M popped out?
📜U dig up the 2 prospectuses. And suddenly it makes sense.
Genius marketing!
🙄 Ok now this is just confusing. Why didn't anyone cry "dilution" yesterday when the first 8.5M popped out?
📜U dig up the 2 prospectuses. And suddenly it makes sense.
Genius marketing!
The reason why @CEOAdam used Mudrick not $GS to sell his first 8.5M was to HIDE the dilution narrative.
Apes fell for it. Even @matt_levine frowned.
Now to fully grasp Mudrick's role in AMC's fabulous rise we needa go back to 2020 & examine this hot summer duo's steamy backdrop.
Apes fell for it. Even @matt_levine frowned.
Now to fully grasp Mudrick's role in AMC's fabulous rise we needa go back to 2020 & examine this hot summer duo's steamy backdrop.
2/ “Let them eat cak—Popcorn!”
Rewind to Dec 2020. Our story begins in the annals of COVID:
Movie biz f**kin blows, revenues collapse 80%, shareholder equity literally flips negative.
Raising debt is a flirt w/ hell.
Any longer w/out cash & there'd be no more 🌽left, let alone🍿
Rewind to Dec 2020. Our story begins in the annals of COVID:
Movie biz f**kin blows, revenues collapse 80%, shareholder equity literally flips negative.
Raising debt is a flirt w/ hell.
Any longer w/out cash & there'd be no more 🌽left, let alone🍿
3/ ATMs
Desperate times... What does AMC do?
Just like u might use ATMs for cash, public co's also sometimes use ATMs (at-the-money offerings) for cash. Under such a structure, an investment bank sells shares directly to existing trading markets (e.g. us retail bottom-feeders).
Desperate times... What does AMC do?
Just like u might use ATMs for cash, public co's also sometimes use ATMs (at-the-money offerings) for cash. Under such a structure, an investment bank sells shares directly to existing trading markets (e.g. us retail bottom-feeders).
For the longest time, AMC trusted its loyal partner $GS to make all ATM deals.
This year however, returns were... too disappointing.
$3 a pop in Dec. $5 in Jan.
Selling 91M shares for just $270M, only to pay GS another 2.5% cut? This couldn’t be the most efficient way to raise...
This year however, returns were... too disappointing.
$3 a pop in Dec. $5 in Jan.
Selling 91M shares for just $270M, only to pay GS another 2.5% cut? This couldn’t be the most efficient way to raise...
4/ Who is Mudrick? Distress is her sweet spot.
For the credit-illiterate, Mudrick Cap is a $3B distressed credit fund, meaning it buys dirt-cheap debt from firms about to go bankrupt & seizes control to help turn operations around.
No surprise, $AMC caught Mudrick’s vulture eye.
For the credit-illiterate, Mudrick Cap is a $3B distressed credit fund, meaning it buys dirt-cheap debt from firms about to go bankrupt & seizes control to help turn operations around.
No surprise, $AMC caught Mudrick’s vulture eye.
5/ The affair begins.
Q4 2020: Mudrick Cap purchases $100M in aggregate principal on 15% coupon 1st-lien bonds & exchanges $100M of 10% coupon 2nd-lien bonds for 22M shares. At this point, AMC reports 117M diluted shares outstanding.
TLDR: debt fund now owns a 20% equity stake😮
Q4 2020: Mudrick Cap purchases $100M in aggregate principal on 15% coupon 1st-lien bonds & exchanges $100M of 10% coupon 2nd-lien bonds for 22M shares. At this point, AMC reports 117M diluted shares outstanding.
TLDR: debt fund now owns a 20% equity stake😮
6/ “When I was a boy in Bulgaria”
Fast-forward to Feb 2021. $GME explodes on peak pandemic cabin fever. Days later the retail ant army discovers $AMC.
“Strike while the iron’s hot! We're trading at 10x P/S. Let's raise capital from the apes now!" says Mudrick to its new beau.
Fast-forward to Feb 2021. $GME explodes on peak pandemic cabin fever. Days later the retail ant army discovers $AMC.
“Strike while the iron’s hot! We're trading at 10x P/S. Let's raise capital from the apes now!" says Mudrick to its new beau.
May 28. $AMC explodes on short interest & GME déjà vu. Stock is pushing $30...
CEO Adam begins to think, "Time to try the GS ATM again! Reddit apes love me, I'm trading at 20x P/S... I'm basically a tech stonk!"
GS: "Ok that’ll be 2.5% pleas-"
Mudrick: "NO! GTFO! AMC, U R MINE!”
CEO Adam begins to think, "Time to try the GS ATM again! Reddit apes love me, I'm trading at 20x P/S... I'm basically a tech stonk!"
GS: "Ok that’ll be 2.5% pleas-"
Mudrick: "NO! GTFO! AMC, U R MINE!”
June 1. AMC raises $230M in new equity from Mudrick Cap. Goldman Sachs is MIA.
How it happened
- Mudrick buys 8.5M shares @ $27.12 a pop pre-market
- News gets out. AMC rallies 20+% before the bell
- Trading opens. Mudrick dumps it all @ $33.53, pocketing the quickest $40M ever.
How it happened
- Mudrick buys 8.5M shares @ $27.12 a pop pre-market
- News gets out. AMC rallies 20+% before the bell
- Trading opens. Mudrick dumps it all @ $33.53, pocketing the quickest $40M ever.
So what, u might think. A rando hedge fund flips some quick buck. What’s the big deal?
2 things.
- By offering via a hedge fund, AMC got to fly "dilution" under the radar
- This deal is yet another nail in the coffin underpinning the secular disintermediation of investment banks
2 things.
- By offering via a hedge fund, AMC got to fly "dilution" under the radar
- This deal is yet another nail in the coffin underpinning the secular disintermediation of investment banks
Matt Levine describes the situation in depth.
But let's zoom in on point #2 for a sec: how does this AMC-Mudrick tryst threaten to disintermediate the giant bulge brackets?
But let's zoom in on point #2 for a sec: how does this AMC-Mudrick tryst threaten to disintermediate the giant bulge brackets?
GS ECM whose literal job is to run IPOs & follow-ons just got shut out of a $230M deal here. That foregone 2.5% fee is its main revenue model.
This, in tandem w/ recent tech darlings skipping the middlebanks to go public via DPO (Slack, Palantir, Coinbase), spells eventual doom.
This, in tandem w/ recent tech darlings skipping the middlebanks to go public via DPO (Slack, Palantir, Coinbase), spells eventual doom.
7/ Dilution cap
Let's end full-circle on those 11.6M newest shares.
Will Redditors keep FUDing? Or will they shrug off by closing bell?
I'm no fortune teller, but can say this supply flood is capped. Unless its shareholders vote otherwise, AMC has only 12M shares left to issue.
Let's end full-circle on those 11.6M newest shares.
Will Redditors keep FUDing? Or will they shrug off by closing bell?
I'm no fortune teller, but can say this supply flood is capped. Unless its shareholders vote otherwise, AMC has only 12M shares left to issue.
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