Semafor’s Liz Hoffman published a juicy little tale about Adam Aron, the voluble CEO of AMC Theatres, the nation’s largest theater chain and a meme stock that recently crashed in spectacular style.
The meme stocks craze began in 2021 and has seen better days. Shares of AMC traded at nosebleed levels, pushed by an oddly dedicated base of retail investors named the "AMC Apes," who thought a money-losing theater chain company would make them rich.
They became obsessed with conspiracy theories about the stock, such as an evil cabal of hedge funds wanting to destroy the company. They thought they could fight back by ignoring all the bad news and holding on for dear life.
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Their demigod in this us-against-them fantasy was Aron, the so-called "Silverback" Ape, who wore that moniker proudly and peppered his Twitter feed with various rallying cries that, with their help, AMC would survive and thrive even as he threw more Hail Marys than Aaron Rodgers.
"There’s MORE gold in them thar hills," he posted after buying a piece of a gold mine for no good reason other than maybe to change the subject from his company’s cash-burning balance sheet.
When he needed to dilute the Ape with more shares because AMC couldn’t pay its bills, he assured them it was "good dilution" even if no term exists to describe the act of issuing more shares while depressing the holdings of current investors. AMC box office sales still hadn’t returned to pre-pandemic levels thanks to streaming and other headwinds. When it had occasional success, such as "Top Gun: Maverick," Aron tweeted the hashtag #CHOKEonTHAT to the company’s detractors.
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Pretty reckless stuff coming from a CEO who has to know occasional hits or the upcoming Taylor Swift special won’t do much to change AMC declining fortunes. More recklessness, according to Semafor’s Hoffman, went down in March 2022, during the waning days of the meme craze when Aron became a victim of a catfishing scheme.
Hoffman wrote a Bronx woman somehow got Aron’s phone number and began texting him. He engaged her back and sent her explicit photos of himself. She then tried to blackmail him. He reported it to the FBI, and the woman was subsequently arrested and jailed. Law enforcement told him to report the matter to his board.
Responding to the report on the social media platform X, formerly Twitter, Aron said, "By definition, I live my life in the public eye. Unfortunately, last year I became the victim of an elaborate criminal extortion by a third party who was unknown to me related to false allegations about my personal life. Rather than give in to blackmail, I personally engaged counsel and other professional advisors and reported the matter to law enforcement. I did so knowing I risked personal embarrassment. But with my access to resources, if I did not stand up against blackmail, who could?"
All tawdry stuff, and Hoffman did an excellent job sifting through legal documents to uncover the identity of "victim no 1." And yet the Semafor piece is missing some serious connective tissue. Aron didn’t just have an affair. He literally fell for a weird honey-pot scheme. He was sent explicit photos, and he sent some back, and at one point he asked her if she was a past acquaintance who performed some "unmentionable things" on him, Hoffman writes.
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What CEO with a clue puts that in writing?
What does this say about Aron’s judgment during the meme craze? Recall this is a CEO who sold his stock into the Apes irrational exuberance, walking away with $43 million in less than a year, a salary that surpassed CEOs who run profitable companies (AMC wasn’t and barely is now).
He needed to issue stock to keep AMC out of bankruptcy, but "dilution" wiped out nearly 99% of the stock's value from its highs. He engineered a 10-for-one reverse stock split that masquerades the true value of AMC shares, which are just above a buck. When AMC stock began to crash in the summer as dilution became a reality, many of the Apes spouted a conspiracy theory involving a short-sale technicality called "failure to deliver." Aron called on the SEC to investigate. My sources say they did and alerted him about what they found, though he’s not releasing the finding for reasons I can only guess.
As I noted before, box office knockoffs did little to change AMC’s shaky finances, but they were met with more hype on social media.
"I keep getting asked "Wen pounce?" he wrote for the Apes who followed his every word on X. "Know this: 1. I always keep my word. 2. I’ve said publicly a pounce would not happen before Second Quarter 2022 earnings are announced. 3. Press release issued today that Q2 earnings to be announced on Thurs, August 4. Read between those lines."
He said that when the stock traded at $50, or $5, if you factor in the reverse split. Since then, shares have lost 50% of their value.
Adam Aron would tell you his standard disclosures routinely issue warnings about the company and AMC’s speculative nature. He confirmed the Semafor story and called it an "entirely personal matter." That’s one way to look at it.
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Another way: It was as reckless as "good dilution."
