AMC Theater Shuns Cryptocurrency With $28M Investment In Precious Metals Mine

AMC has announced an acquisition of 22% in Hycroft Mining Holdings for an investment of $27.9 million. Commenting on the deal, AMC CEO Adam Aron He said he saw parallels between Hycroft’s current situation and AMC’s a year ago, adding that the investment could prove mutually beneficial.

“It also has rock-solid assets, but for a variety of reasons, it has faced a serious and immediate liquidity problem. As a result, its share price has dropped. We are sure that our participation can be of great help in overcoming their challenges, for their benefit and ours.”

AMC and GameStop, the meme exchange, have failed to recapture the hype of last year’s WallStreetBets movement, at least from a stock price perspective. Considering the macro picture, it looks like AMC is hedging precious metals on cryptocurrencies.

For a company that has championed the cause of crypto since its meme stock revival, for example by accepting Shiba Inu and Dogecoin as payment methods, investing in Hycroft is something of a disappointment.

Analysts predict more pain for AMC

Last year, both AMC and GameStop were the beneficiaries of the WallStreetBets movement, which sought to teach greedy institutional short sellers a lesson.

AMC shares surged, hitting an all-time high of $59.26 in June 2021. But since then, it’s been downhill for the theater chain as investors look elsewhere.

Source: google.com

Analysis of AMC’s annual financial results shows that revenue for the year ended December 31, 2021 increased 103% to $2.53 billion. However, this is still less than half that of 2017, 2018 and 2019.

Similarly, net income is up 72% for 2021, but is still a loss of $1.27 billion. In short, while the WallStreetBets move provided a jolt to the bottom line, the company is still not profitable. And in a context of tightening spending, the picture is bleak.

Forbes says that despite the downgrade, die-hard investors are still hoping to return to last year’s fervor. This provides “an excellent setup for stocks to crash.” They add that common sense and reality are returning, spelling doom for companies that are big on easy money speculation.

“GameStop and AMC Entertainment have also dropped and significantly reduced earnings. However, each is still above its lowest starting share price. Judging by the Reddit comment, the meme troops are still hoping for last year’s excitement to return.”

Why invest in precious metals instead of cryptocurrencies?

Despite the lifting of restrictions, moviegoers, particularly those over 40, who made up 40% of frequent moviegoers before the pandemic, are less enthusiastic about gathering indoors with strangers for extended periods.

Coupled with the availability of a wide variety of in-home streaming services, AMC is dealing with this in terms of convincing people to come back. Add to that rising inflation and the associated cutback in unnecessary spending, and the situation is even more precarious.

While many expected AMC to expand its digital asset operations in response, Bloomberg says the crypto safe-haven narrative has been called into question of late. For that reason, it’s no surprise that AMC has shunned cryptocurrencies in favor of gold.

After all, gold has proven its worth with thousands of years of history, while there is no data with which to model Bitcoin’s behavior during an economic collapse.

AMC’s investment in Hycroft could be called safe play.