Meme stocks don’t play by conventional rules. For evidence, just look at theater operator AMC Entertainment, whose shares are surging after the company announced it had sold stock.
That’s not supposed to be the reaction.
Typically, shares are weak when a company sells more stock, as the market adjusts to new supply. Instead, AMC is up 16% in early trading.
And usually a company will sell large blocks of shares at a lower price than where they had been trading. Instead, AMC sold 8.5 million new shares to Mudrick Capital for $27.12 a share, a premium to Friday’s close of $26.12.
The use of proceeds is one reason the market is excited. AMC needs more cash to evaluate acquisitions. The company is looking to grow coming out of the pandemic, possibly picking up other theater networks on the cheap.
Box office results are another reason the shares are strong Tuesday. A Quiet Place II pulled in $47 million at the U.S. box office from May 28 to 30, nearly as much as the $50 million the original film earned in its first weekend back in 2018.
Of course, none of this helps explain why shares of a still challenged AMC are trading at a price well above their pre-Covid highs.
AMC is a meme stock. Conventional rules don’t apply.
—Al Root
***In this week’s Barron’s Streetwise podcast, columnist Jack Hough looks into why everything from pickles to pool chlorine is in short supply. Listen here.
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Biden to Mark 100th Anniversary of Tulsa Race Massacre
President Joe Biden is scheduled to visit Tulsa, Oklahoma, on Tuesday, to mark the 100th anniversary of the 1921 race massacre that killed an estimated 300 residents, left 10,000 people homeless, and destroyed prosperous Black-owned businesses in what was then now known as Black Wall Street.
- Biden will meet survivors Viola Fletcher, 107, her brother Hughes Van Ellis, 100, and Lessie Benningfield Randle, 106. The three testified before Congress on May 19. “Our country may forget this history, but I cannot,” Fletcher told lawmakers. Her brother added: “Please, do not let me leave this Earth without justice.”
- Ariel Investments founder John Rogers Jr., told Barron’sthat his maternal great-grandfather, J.B. Stradford, owned the nation’s largest Black-owned hotel and other properties in Tulsa. Rogers estimated that his wealth, had it been allowed to compound over the past century, would surpass $100 million today.
- Rogers said the Tulsa Race Massacre and other violence against prosperous Black entrepreneurship has prevented wealth creation. “We don’t have multigenerational wealth in our community, so we don’t get exposed to the magic of compound interest or learn the importance of the stock market,” he said.
- The median net worth of a Black household in the U.S. is $23,000, compared with $184,000 for a white family, per the Federal Reserve Bank of St. Louis. Closing racial gaps in wages, education, housing, and investment could raise U.S. economic output by $5 trillion in five years, Citigroup said.
What’s Next: Rogers said business leaders need to look beyond scholarships and hire more diverse financial advisors, legal counsel, consultants and advertising executives. “All of the challenges we continue to face are tied to wealth,” he said. “You can’t fix the core problems without creating new vehicles to build multigenerational wealth.”
—Reshma Kapadia and Janet H. Cho
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Economists Anticipate a Surge in Hiring in May
This week, the government will release a much-anticipated report on the number of jobs created in May, after a disappointing number for April helped inspire 24 states to end the extra $300 federal unemployment benefits starting in June.
- Economists expect the economy added 674,000 nonfarm payrolls in May, up from 266,000 in April, The Wall Street Journal reported. It would take the labor market roughly a year to return to its February 2020 employment level at that pace.
- Employers added 1.8 million jobs so far this year. Payrolls remain 8.2 million below their pre-pandemic peak, but about one-third of those workers retired and may not return to the workforce, according to the Dallas Fed.
- The northern Mountain West, the Plains, and northern New England had three open positions for every one unemployed job seeker in April, according to ZipRecruiter. These areas had fewer pandemic business restrictions and opened faster.
- A cluster of states on the West and East Coasts have about one open position per unemployed worker, according to ZipRecruiter. The unemployment rate in these regions was well above the national average of 6.1% in April.
What’s Next: A strong rebound in hiring for May could push the Federal Reserve closer to signaling reductions in its bond purchases. The central bank has said it wants the labor market to make “substantial further progress” before it begins scaling back.
—Liz Moyer
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U.S. Covid-19 Cases Drop to Lowest in More Than a Year
With Covid cases falling in the U.S., World Health Organization Director-General Tedros Adhanom Ghebreyesus said Monday, “the reality is, we still have a lot of work to do to end this pandemic,” adding, “it would be a monumental error for any country to think the danger has passed.”
- U.S. coronavirus cases have dropped to their lowest level in more than a year, with 6,725 new cases reported on Monday, according to Johns Hopkins University. The seven-day average of new Covid-19 cases is now hovering at 17,000 a day.
- Since WHO declared Covid a global pandemic on March 11, 2020, more than 170 million cases have been confirmed worldwide, and 3.5 million people have died. That includes more than 33.2 million cases in the U.S. with 594,000 deaths, the highest in the world.
- More than 167.7 million Americans have received at least one vaccine shot, including 62% of adults, as of Sunday. More than 135 million Americans are fully vaccinated, according to the Centers for Disease Control and Prevention.
- The more than 7 million people traveling through U.S. airports over the weekend through Monday set a pandemic record, with Friday’s 1.96 million travelers setting the highest one-day count this year, according to the Transportation Security Administration.
- As the picture brightens in the U.S., Peru on Monday more than doubled its official death toll after a government review of deaths in the country. A lack of testing had made confirming fatalities from the virus difficult.
- The situation in Asia is worsening. Malaysia entered a two-week lockdown on Tuesday, China has instituted a partial lockdown in Guangzhou, and daily new cases were at a record high in Thailand on Monday.
What’s Next: As air travel resumes, reports of disorderly passengers have soared, with 76% of the 2,500 incidents linked to disputes over mask-wearing, the Federal Aviation Administration said. American Airlines and Southwest Airlines both cited those disruptions in announcing they are suspending plans to resume in-flight alcohol service.
—Janet H. Cho
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China Lifts Two-Child Policy to Three as Demographic Crisis Looms
In the face of a looming demographic crisis from an aging population and falling birthrates, China announced that married couples may now have three children, up from two. The decision—made at the highest levels of Chinese politics—includes new supports for education and child-rearing.
- The world’s most populous country scrapped its 1980 one-child policy more than five years ago, allowing couples to have two children. But the bid to increase the number of births appears to have stalled, and the results of China’s 2020 census last month showed that birthrates fell for the fourth straight year.
- The new three-child policy came after a meeting of the Politburo, the top body of the Chinese Communist Party, chaired by President Xi Jinping. China experts say that decisions of this magnitude are usually the product of larger party conferences, so Monday’s move signals concern at the highest levels.
- Shares in fertility companies, milk-formula producers, and toy makers initially soared in Shanghai and Hong Kong on the news, but many of the Hong Kong stocks pared gains on Tuesday. Analysts at Jefferies see China’s new policy as a near-term positive for London-listed consumer-goods giant Reckitt and French food-products group Danone.
What’s Next: Can the Chinese government effectively encourage people to have more babies? Falling birthrates are a global phenomenon, and China also faces a declining population of women of peak childbearing age. It may take more than a green light and new supports from the government. Fewer babies and an aging population remain macro risks for sectors including Chinese pensions and healthcare.
—Jack Denton
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Get Ready for Another Output Increase From OPEC and Russia
OPEC+, the group of oil-producing countries led by Saudi Arabia as well as allies including Russia, is set to increase crude oil production after a meeting on Tuesday. According to analysts, the group is likely to boost output, flooding a hot energy market with more barrels, even as uncertainty remains over the Covid-19 pandemic, especially in Asia.
- OPEC’s technical committee met yesterday and increased its demand forecast for the year, boosting prices. Benchmark Brent crude was trading above $70.80 a barrel by the start of the OPEC+ meeting, up more than 2% on the day as oil hit the highest level since March.
- The oil cartel instituted production cuts more than a year ago to support prices as demand was wiped out by the pandemic. But since early May, as Covid-19 vaccinations have picked up and the health situation improves in major economies, the group has been easing those cuts.
- OPEC+ has planned production increases between May and July that will add 1.2 million barrels a day to the market. On the agenda Tuesday is whether to extend those increases into August. Expect tensions between Russia, which is pushing for faster rises in output, and Saudi Arabia, which is more cautious.
What’s Next: As Big Oil faces an existential threat over the pressures of climate change, investors would be well advised to pay closer attention to the national oil companies that make up OPEC+, which could become more powerful. Last week, Shell was ordered by a Dutch court to cut carbon emissions, and Exxon Mobil and Chevron face increasing pressure from shareholders to adopt climate-friendly policies.
—Jack Denton
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Congrats to the winners of the May virtual stock exchange game! Be sure to join this month’s Barron’s Daily virtual stock exchange challenge and show us your stuff.
Each month, we’ll start a new challenge and invite newsletter readers—you!—to build a portfolio using virtual money and compete against the Barron’s and MarketWatch community.
Everyone will start with the same amount and can trade as often or as little as they choose. We’ll track the leaders and, at the end of the challenge, the winner whose portfolio has the most value will be announced in The Barron’s Daily newsletter.
Are you ready to compete? Join the challenge and pick your stocks here.
***
—Newsletter edited by Stacy Ozol, Liz Moyer, Matt Bemer, Ben Levisohn
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