AMC pares steep losses after the Reddit favorite raises nearly $590 million in new share sale

• AMC closed off its lowest levels of Thursday's session after the company said it raised $587.4 million by selling stock.
• AMC, which is at the center of a fierce rally driven by retail investors, raised the funds by selling shares for $50.85, on average.
• The movie-theater chain told investors they may lose the money they invest in their currently volatile shares.

AMC shares finished off session lows Thursday after the movie-theater chain at the center of this year's massive rally fueled by retail traders said it raised nearly $590 million in a stock sale.

The stock had lost as much as 40% after the company early Thursday said it had planned to sell almost 12 million shares and warned investors that they could lose their money at a time of a stunning and volatile rally that has pushed AMC's valuation to more than $30 billion.

In the afternoon, AMC said it sold the 11.6 million shares it wanted to offload and raised $587.4 million in the process. The average selling price was $50.85 apiece. The stock briefly turned higher after the update then reversed course to finish the session down 18% at $51.34. The decline marked the second in eight sessions.

CEO Adam Aron in a statement said it has now raised about $1.25 billion during the second quarter and the funds will strengthen its balance sheet and give it more flexibility to respond to business opportunities. The company recently began reopening movie theaters after it was forced to close them because of the COVID-19 pandemic.

AMC has taken advantage of a rally that's driven its stock price up by more than 2,410% this year and itself is aware that its stock is likely overvalued.

"We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last," AMC said in an SEC filing on Thursday during which trading in AMC was halted three times on the New York Stock Exchange.

AMC along with GameStop and some other companies have been embraced by retail traders on Reddit's WallStreetBets forum, Twitter and other social media sites who have banded together to squeeze short positions. Short-sellers betting against AMC lost $2.8 billion on Wednesday alone as shares surged as much as 127%, according to data from analytics firm Ortex.

The recent rally was set off by major shareholder Dalian Wanda Group selling almost all of the remainder of its stake in AMC. Redditors responded by cheering the newly available shares and making their newfound weight felt in the market. Last week, AMC soared by 116%.

AMC on Wednesday finished 95% higher despite a share dump from hedge fund Mudrick Capital. The investment firm disposed of its AMC stake after concluding the stock was overvalued and carried higher by a wave of enthusiastic day traders, Bloomberg reported on Tuesday. AMC had said it would use the $230.5 million it raised from Mudrick's purchase to make upgrades at its movie theaters and potentially make acquisitions.