AMC Stock Alert: 8 Things to Know About the $28M AMC-Hycroft Deal

Shares of AMC (NYSE:AMC) stock are in the green this morning following the company’s “bold diversification move.” In a surprising move, AMC announced its purchase of a 22% stake in Hycroft Mining (NASDAQ:HYMC). Hycroft operates in the mining and development of gold and silver. As a result, shares of HYMC stock have surged higher by over 32%. Meanwhile, AMC stock is trading higher by over 4%.

AMC movie theater front glowing in the setting sun with the name shining bright red. AMC stock.
Source: Ian Dewar Photography / Shutterstock

AMC CEO Adam Aron broke the news this morning via Twitter (NYSE:TWTR), touting that Hycroft has 15 million ounces of gold resources and 600 million ounces of silver resources. The move-theater chain will spend $27.9 million in cash to acquire its stake of the mining company. In return, AMC will receive 23.4 million shares of HYMC and an equal amount of warrants. AMC’s move into the precious metals industry is certainly interesting considering the inflationary backdrop. In February, the consumer price index increased by 7.9% year-over-year (YOY), marking the “fastest pace” since 1982.

In a statement, Aron drew similarities between Hycroft and AMC one year ago:

“Our strategic investment being announced today is the result of our having identified a company in an unrelated industry that appears to be just like AMC of a year ago. It, too, has rock-solid assets, but for a variety of reasons, it has been facing a severe and immediate liquidity issue. Its share price has been knocked low as a result. We are confident that our involvement can greatly help it to surmount its challenges — to its benefit, and to ours.”

What else should investors know about the new AMC-Hycroft deal? Let’s jump right in.

AMC Stock: 8 Things to Know About the Hycroft Stake

  1. Each warrant that AMC purchases will consist of “one common share of Hycroft and one common share purchase warrant.”
  2. The common shares will be priced at $1.193, while the purchase warrants will be priced at $1.07 per share.
  3. The warrants will carry a five-year term.
  4. On top of this, AMC will also be able to appoint a representative to Hycroft’s board of directors.
  5. However, AMC isn’t the only entity taking a stake in Hycroft.
  6. Metals investor Eric Sprott will acquire the same amount of stock and warrants that AMC has acquired.
  7. In addition, Sprott Private Resource Lending II has agreed with Hycroft to extend its debt maturity from May 2025 to May 2027.
  8. As part of the agreement, Hycroft won’t have to make principal payments to Sprott Private Resource Lending II. Instead, the mining company plans on paying it all back in a single “bullet” payment in 2027.

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On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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