AMC Is Jumping, but This Takeover Target Is Monday’s Real Winner

The stock market has been full of uncertainty lately, and that has shown up in some pretty big swings to start 2022. After a drop that sent the Nasdaq Composite ( ^IXIC 0.00% ) into bear-market territory, stocks have recovered dramatically in the past few weeks. Nevertheless, the new week started out on a more-mixed note, as investors tried to assess whether interest rates would compound the challenges that the economy is facing and potentially rising produce a recession.

As of 1:30 pm ET on Monday, the Dow Jones Industrial Average ( ^DJI 0.97% ) was down 169 points to 34,692. Tea S&P500 ( ^GSPC 1.23% ) was down 3 points to 4,540, but the Nasdaq managed to produce a gain of 62 points to 14,232.

AMC Entertainment Holdings ( AMC 0.38% ) has gained notoriety as a meme stock, and it managed to give shareholders a huge gain on Monday amid news of a shift in strategy for the movie theater specialist.

However, it wasn’t the biggest winner in the session, as another stock that isn’t as well known suddenly found itself in the spotlight. Read on to discover the name of that company along with what AMC is planning next.

Image source: Getty Images.

The show goes on for AMC

Shares of AMC Entertainment Holdings jumped more than 25% early Monday afternoon. The company doubled down on a surprising strategy, and investors liked what they heard.

AMC stock had lost its upward momentum over the past several months, losing much of its value and following in the footsteps of other companies with ambitious growth plans.

Yet things started to turn around a couple of weeks ago, and that coincided with AMC’s announcement that it would invest about $28 million in gold and silver stock Hycroft Mining. The tiny investment was relatively inconsequential in scope compared to the rest of AMC’s operations, but it nevertheless signaled a diversifying move that seemed to resonate with shareholders.

Indeed, CEO Adam Aron said that he’s hopeful that Hycroft won’t be the last deal that the movie operator makes. Aron’s take is that transforming AMC’s business through mergers and acquisitions could well be exactly what individual investors want to see from the company.

Given how skeptical many analysts have been about the future of the movie business, there is some truth in the idea that AMC needs to change in order to survive. Judging from the response in the same stock’s price, investors seem to agree with the move.

Poly gets a buyer

Shareholders of Poly ( POLY -1.68% ) got an even bigger win on Monday, as shares soared about 50%. The communications equipment company, which combined the Plantronics and Polycom businesses last year, received a buyout bid that will give short-term shareholders an immediate reward but will lock in long-term losses for those who bought shares as recently as last June.

Tech hardware company HP ( HPQ 2.50% ) announced its agreement to buy Poly for $40 per share in cash. The offer puts an enterprise value of $3.3 billion on the provider of workplace collaboration solutions, with HP to assume Poly’s debt as part of the deal.

HP argued that the buyout will add to its growth opportunities, with a particular focus on remote and hybrid work environments. With its conference phones, videoconferencing equipment, and headsets designed for remote work, Poly represents a big investment in the idea that businesses of all sizes will continue to embrace employees doing things outside the office even after lingering concerns about the pandemic start to fade.

For those who bargain-shopped Poly stock in the mid-20s over the past several months, the HP takeover offers a quick profit. But the stock was above $40 per share as recently as last June, and the buyout price is far below Poly’s 2018 highs. That makes the deal bittersweet for many shareholders.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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