AMC Entertainment bought a 22 percent stake in a Nevada-based gold and silver mine this week, and analysts, investors, and commodity experts are all scratching their heads.
What is the world's largest movie theater chain doing getting into the mining business? Did we miss something? Is the AMC Stubs program offering a new gold-lined membership card? Does AMC know about some innovation in big-screen projection that requires precious metals?
Unfortunately, the answer is somewhat less satisfying. In a tweet following the announcement, CEO Adam Aron said the investment in Hycroft Mining was a "bold diversification move," and that AMC would use its expertise "to help them bolster their liquidity."
If you're still wondering what that means, you're not the only one.
"It's about as random as it sounds," Everett Millman, a precious metal specialist at Gainesville Coins, LLC, told Cheddar. "It really seems like we're in the late stages of a bull market."
One analyst, speaking to The Verge, was even blunter, calling the purchase "idiotic."
To his credit, the randomness of the investment wasn't lost on AMC's chief executive
“To state the obvious, one would not normally think that a movie theatre company’s core competency includes gold or silver mining," Aron said in a news release.
The CEO went on to tout AMC's recent success in navigating a liquidity challenge, strengthening its balance sheet, and "communicating with individual retail investors."
What Aron is alluding to is the explosive rise of AMC's stock price last year during the now-legendary meme stock craze. Being second only to GameStop, AMC was a major beneficiary of the Reddit-fueled rally and has since leveraged those funds to help revive the company.
"What it mainly does is it bolsters AMC's reputation as a meme stock kingmaker," said Millman. "They can sort of show other companies how to be a meme stock and navigate the retail investing market."
The problem, according to Millman, is that the lessons of the meme stock craze don't map very well onto the mining business.
Mining is notoriously difficult to invest in, because there's a long lag-time between investment and any potential payoff. It can take upwards of 10 years to build a mine, so even if you invest while the prices of gold and silver are high, they could drop before the mine is completed.
In other words, it's not a great place for the short attention span of retail investors and could even lead to dangerous volatility in a market that's supposed to facilitate the exchange of essential goods.
Of course, it's worth noting that the commodities market doesn't need any help from AMC to burn itself with speculative investment. Just last week, the London Metal Exchange shut down because a Chinese nickel giant couldn't cover its massive short position on its own product.
That being said, this is not how the commodities market is supposed to work, and it's unclear if the meme stock success story will translate into the mining business.
"It creates more confusion and more opportunity for investors to lose a lot of money because commodity markets don't usually work that way," Millman said. "Typically, commodities are a pretty boring space in finance."
In the short-term, the investment could help Hycroft get itself out of the hole, but whether AMC proves itself as a "meme stock kingmaker" remains to be seen.