Fact Check: Do Retail Investors Own 90% of AMC like Adam Aron Says?

Mohit Oberoi, CFA - Author
By

Mar. 2 2022, Published 8:23 a.m. ET

It has been more than a year since the meme stock mania gripped Wall Street. AMC Entertainment (AMC) was among the faces of the meme stock trade as retail investors triggered short squeezes and left Wall Street hedge funds running for cover, both literally and figuratively.

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However, institutional investors seem to be warming up to AMC stock. How has the institutional ownership of AMC changed recently and should you follow the smart money, as institutional funds are known?

What's the percentage of AMC Entertainment institutional ownership?

According to data compiled by Fidelity, 34.4 percent of AMC’s outstanding float of 516 million is held by institutions. Of this, 21.4 percent is institutional stock ownership, while 13 percent is institutional mutual fund ownership. Insiders own a 6.3 percent stake in the company, while others, which are primarily retail investors, hold a 54.4 percent stake.

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To put that in perspective, retail investors own just above 60 percent of GameStop, a fellow meme stock. However, retail ownership is much lower in mega-cap companies. For example, retail investors own just under 40 percent of Apple and around 20 percent of Facebook parent Meta Platforms.

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Institutional investors have increased their stake in AMC.

It's widely believed that Wall Street isn't convinced about AMC stock, or at least that’s what the analyst target prices tell us. Also, AMC is now associated with retail investors, including the “Apes.” Even AMC CEO Adam Aron praised retail investors on the earnings call for their backing and rewarded them with goodies like NFTs and free popcorn at the cinemas.

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Retail investors own the majority of AMC. However, behind the scenes, institutional investors have also been adding to their positions. In the fourth quarter of 2021, institutional investors were net buyers of 15.8 million AMC shares and increased their ownership by 9.8 percent. In the previous quarter also, they net bought 33.4 million AMC shares and increased the stake by 26.1 percent.

Adam Aron says 90 percent of AMC is owned by retail investors.

During the fourth-quarter earnings call, Aron said that more than 90 percent of AMC is owned by retail investors. While it may seem out of sync with the data, there's merit in it. Aron specified that the figure was arrived at after excluding index funds that have to buy AMC out of compulsion. That said, the same analogy would apply to all the stocks, and not just AMC.

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What are the biggest stockholders in AMC?

The Vanguard Group is the biggest stockholder of AMC and holds a 9.17 percent stake in the cinema chain company. BlackRock, which is the world’s largest money manager, is a close second and holds an 8.36 percent stake in the company. State Street Corporation, Geode Capital Management, and Northern Trust Management make up the other top three AMC stockholders in that order.

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Institutional investors are buying the dip.

Institutional owners seem to be buying the dip in AMC stock, which is reflected in the increase in their ownership. However, the “smart money” doesn’t seem to be getting it right since AMC stock has lost a third of its market cap in 2022.

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To be sure, there has been a broader market sell-off and even the mega-cap tech stocks have also tumbled. The FAANG pack has looked weak with Meta Platforms and Netflix falling to 52-week lows.

Should you buy AMC stock?

AMC released its fourth-quarter 2021 earnings, which showed revenues rising to a two-year high. The company’s top line and bottom line were better than expected. However, AMC still posted a loss. The “two-year high revenue” should be seen in perspective since it's coming from a low base.

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AMC is saddled with a lot of debt and its outstanding share count has also expanded. On the business front, while moviegoing is improving dramatically since the economy has reopened, the industry is staring at structural demand destruction due to streaming.

Overall, it might not be wise to follow the smart money in AMC. Insider selling tells us a different picture and even Aron offloaded some AMC shares in 2021. For now, investors should consider waiting it out before buying AMC stock.

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