(Bloomberg) — Faithful investors who helped pull AMC Entertainment Holdings Inc. back from the financial brink are cheering its unorthodox investment in Hycroft Mining Holding Corp., a troubled gold and silver mining company.
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The investment follows a challenging run for Hycroft, which went public in early 2020 through a merger with a special purpose acquisition company backed by hedge fund manager Jason Mudrick. It had lost around 80% of its value since its debut, and the company asked its lenders to grant it some breathing room on its debt last month.
Hycroft’s largest shareholder, Mudrick Capital, has experienced this phenomenon before. Mudrick was an architect of AMC’s narrow escape from bankruptcy last year. When AMC’s shares jumped in early 2021, Mudrick encouraged the theater operator to capitalize on the rally. The company issued about $400 million worth of new shares and used the proceeds to pay down debt.
This time around, Mudrick’s role was more involved.
After rushing AMC management to a remote Nevada location to visit the mine before finalizing the decision, Mudrick, AMC’s Chief Executive Officer Adam Aron and a handful of lawyers hashed out the details via Zoom.
From the jump, time was short. Hycroft had only six days to put together its deal in order to preserve a low price for AMC’s stock purchases; Nasdaq requirements meant they would price at the average of the past several days of trading, and delay would include post-rally prices in that average.
Representatives from Mudrick Capital, AMC, and Hycroft did not provide comment.
Reddit investors started talking about Hycroft and drove its stock up to a high of $1.88 on March 11, the stock’s highest price since August. Social media activity preceded a surge in the shares last Tuesday that caught the attention of stakeholders, according to a person with knowledge of the dealmaking over the past week.
Read More: Hycroft Options, Stock Trading Volume Went Crazy Before AMC Deal
Jason Mudrick recognized a familiar opportunity and called on an old partner — AMC’s Aron, who had become a skilled Reddit-whisperer — to help him sell Hycroft on the idea, according to the person familiar. Instead, it also led to a surprise investment offer from the AMC CEO.
Today, Hycroft said it would sell up to $500 million of additional shares in a future at-the-market issuance. It may use proceeds from that and the AMC investment to help finance new technology to better process its reserves, according to the person familiar.
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