“’To the Moon’ is not fundamental analysis. It is an inducement. It is an encouragement of belief. And the only thing that is fueling that rocket ship ‘To the Moon’ is the credulity of others.” – Josh Wolfe

In the 1968 classic movie Planet of the Apes, astronaut George Taylor (Charlton Heston) and his crew crash-land on an unknown planet that is inhabited by a species of highly evolved apes. The apes don’t look like humans – they’re apes, after all – but they sure seem to act like them. In a reversal of roles, the apes keep humans in cages for observation and experimentation. The movie is an unsubtle indictment of how we’ve managed our own planet, and the ending is one for the ages. Here’s how the website Looper describes it:

“At the end of the movie, George Taylor (Heston) finds out that he's been on planet Earth the entire movie. He comes across a major telltale sign that he is, in fact, on his own planet when he sees the Statue of Liberty in shambles, indicating that Earth has somehow gone into an apocalyptic dive. As soon as Taylor thinks he's made it through his massive ordeal, that he's conquered and survived it all, he realizes that he's basically back to square one.”

We were reminded of the movie after reading an extensive exposé on AMC Entertainment Holdings (AMC) by the Wall Street Journal titled “Inside AMC’s Crazy, Bonkers, Upside-Down Year of Apes, Memes and Shorts.” The piece is jam-packed with fascinating tidbits and worthy of a full read. Here’s how it opens (emphasis added throughout this piece):

“A mob rescued the world’s largest movie-theater chain from the edge of bankruptcy. It turned out to be only the first act in an improbable story that made this year in American business like none other.
More than four million people joined forces to put billions of dollars into AMC Entertainment Holdings Inc., staking their money on a company so battered by the pandemic and competition from streaming entertainment that Wall Street investors had bet big on its imminent collapse.”

The piece goes on to explain how an army of retail investors, describing themselves as apes after the famous movie, have banded together to orchestrate a short squeeze in AMC’s stock, and how they view themselves as fighting the evil hedge funds of Wall Street. One quote really caught our eye:

“Tremayne ‘Trey’ Michael Collins, a 24-year-old Army officer in Oklahoma, is a leading voice of the ape movement. He says to forget about AMC’s business fundamentals and instead put trust in the ape collective.
‘This isn’t a trade about fundamentals. It’s just not,’ he said in July. ‘The moment you mention the word fundamentals, you don’t get the trade.’
Such advice has won Mr. Collins nearly 400,000 YouTube subscribers to his show ‘Trey’s Trades,’ where he promotes unproved conspiracies against the apes and urges AMC shareholders to hold on to the stock. Contrary views aren’t welcome.”

Oh, we get the trade, Mr. Collins.

Longtime readers of Doomberg will remember we covered the AMC saga as part of our Super Stonks! series several months ago. In that piece, we described in significant detail why we believe AMC is a broken business. We further made the case that the equity value of AMC is almost certainly worthless, and we skewered CEO Adam Aron for opportunistically taking advantage of the retail mob for his own enrichment (and that of the well-heeled debt investors in his capital table). While we won’t repeat those arguments here, we did reread that piece in preparation for this one, and we stand by every word.

Since that piece published, Aron’s behavior has been downright shameless and gimmicky: committing that he’ll accept the joke crypto Dogecoin as payment by year-end and offering free popcorn to retail investors who purchase his stock. When another joke crypto called Shiba Inu was trending, Aron proclaimed AMC would accept it as payment as well. Here’s how Coinbase describes Shiba Inu:

“Shiba Inu (SHIB) is a token that aspires to be an Ethereum-based alternative to Dogecoin (DOGE), the popular memecoin. Unlike Bitcoin, which is designed to be scarce, SHIB is intentionally abundant — with a total supply of one quadrillion. The Shiba Inu Token ecosystem supports projects such as an NFT art incubator and the development of a decentralized exchange called Shibaswap.”

Aron has also directed his company to get into non-fungible tokens (NFTs), because why not? After issuing an NFT tied to ticket sales for the new Spider-Man movie, AMC issued a press released titled AMC Theatres and Wax to Issue a New Exclusive “I Own AMC” NFT to All Existing and New Members of AMC Investor Connect. We’re not sure how exclusive this “I Own AMC” NFT truly is since we were able to right-click on a version of it found on the web, save it to our hard drive as a JPEG file, and reproduce it here for all our readers to see. Consider yourselves part of history.

Aron’s behavior is the exception that proves the rule. No serious CEO with real prospects for profit would flail about on social media, stitching himself to whatever nonsense is currently trending online. They are too busy doing the serious work of capturing profits. Instead, Aron and his team have been busy dumping stock, selling more than $80 million worth and counting so far this year. Apparently, insiders at AMC aren’t so confident that a short squeeze is imminent.

In a Greater Fool’s trade, a speculator takes a position in a questionable security in the hopes that a more foolish investor will bail them out at a higher price. This happens regularly, especially in market booms like the one we’ve experienced in the past 18 months, and the ending is never different. Eventually, the supply of new foolish money dries up, momentum behind the movement fizzles, and the price of the security reverts to fair value. The underlying business at AMC is in terminal decline, the capital table is wrecked, the stock has been diluted so extensively it would make a penny stock promoter blush, and we believe the fair value of AMC is zero. Could it double or triple from here before reality is confronted? Absolutely, which is why we have no position and have no intention to take one.

We leave you with the final quote from The Planet of the Apes. When Taylor discovers the Statue of Liberty and it dawns on him that he has been on Earth the entire time, he realizes how foolhardy humans were in their stewardship of the planet. Leaders on Wall Street, like Aron and his is debt holders, would be wise to consider the long-term consequences of their actions, lest they end up in a cage of their own making.

“You maniacs! You blew it up! Damn you! God damn you all to hell!”

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No Planet for the Apes