In this June 2, 2021 interview, host Anthony Cheung talks with market commentator Eddie Dolmez about the sudden resurgence of meme stocks such as AMC, GameStop, and BlackBerry. They frame the rally as a “round 2” driven by cheap money and post‑lockdown market sentiment. The conversation dives into Mudrick Capital’s private purchase of a large block of AMC shares, the rapid resale of that stake, and how the transaction provided AMC with cash to shore up its balance sheet, pursue acquisitions, and give CEO Adam Aron flexibility. Eddie explains the underlying market‑making mechanics: massive option volume forces market makers to delta‑hedge by buying the underlying stock, which can trigger further buying and create a gamma squeeze, amplifying price moves. The hosts note that the original David‑versus‑Goliath narrative has flipped—hedge funds are now jumping on the momentum, profiting while many retail investors who buy near the top incur losses. They also debunk retail hype about AMC reaching $1,000 a share, highlighting a lack of understanding of market‑cap fundamentals. The interview ends with a call for viewer questions.
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Hey, hi everyone, it is June 2nd and I'm joined by Eddie Dolmez, and I wanted to get Eddie back on because, uh, as you guys might know, every morning I go through all of the news and I put together, construct a bit of a macro outlook for the day. But one thing that I don't look at too closely, but I'm seeing more attention being paid to, is the meme stocks that seem to be back in fashion again. And I did see last night that GameStop were up around 12%, AMC were up about 23%, BlackBerry up about 15%, which are obviously spectacularly large gains for an intraday session. So I wanted to get Eddie back on to explain basically what, what's going on, Eddie, here with these meme stocks. Is this round 2 or what?
Well, it certainly looks like round 2, which is— it's quite surprising actually because, you know, when it happened with GameStop, it's almost a year ago I think. Um, but you know, it's happened a few times in various different stocks and different meme stocks and things like that, and then cryptocurrency. But when it first happened, it was almost written off as a one-time event, speculative excess. This will never happen again, the retail against the hedge funds, but it's happened again. And as I probably mentioned in the previous video, of course, this is just the era of cheap money, Fed liquidity that's been pumping in. But if you remember, one of the big functions of last time was that everyone was at home, right? And it was lockdowns, and it was, you know, the depth.
I thought it was a lockdown stimulus check double whammy, but these things seemingly are ending.
Absolutely. So, you know, the US is almost open, particularly in some states. The UK is opening up, vaccines are going well in, you know, the UK and the US. So it was kind of coined as a stay-at-home, you know, everyone's-on-their-phones phase, everyone's bored. The casinos are shut, but this is actually now turning into a bit of an everlasting theme. And actually, one, on a serious note, because a lot of this isn't serious, but on a serious note, that this is actually a market structural thing that looks like it's here to stay. So for all serious investors, retail traders, you know, this, this is something that you need to take into account, I think, from now on.
So one of the things I was reading was about this guy called— I'd never heard of him before, or his firm— Jason Mudrick. I'm not sure if I've said his surname right, but Jason Mudrick was telling the company, in this company AMC, the cinema operator, that they should basically take advantage of this wild rally and sell stock to stay in business. So what's his role in all of this? I mean, I've read a little bit about their fund, but can you explain?
Yeah. So this is again where it gets a little bit dark. So the whole premise of this retail thing is David versus Goliath, right? It's the small fries against the big hedge fund taking advantage of them. And like we saw with the Melvin Capital blowup, that worked in some capacities, but of course it's quite naive to think that only retail are pushing these stocks up, right? Of course, opportunity draws attraction and all these hedge funds are now jumping on these momentum strategies, making a ton of money. So it's really turned from, you know, retail, you know, David versus Goliath, to the hedge funds are jumping on it and making a ton of money. So it kind of defeats the object. This is the one bit I don't really understand from a psychological perspective. But Mudrick Capital, uh, basically bought a ton of, uh, stock from AMC. So what this basically means is AMC stock is up 1,300% year to date, 1,304%, a huge amount. When a stock goes up so much, you can obviously raise debt at any point, but you can also issue shares. This is a private sale to Mudrick Capital, who are a buyer of those shares. What this does for AMC is it basically raises liquidity. It gives them cash to then obviously offset all of the damage that they experienced during the COVID crisis. Obviously, it's a cinema company. I was listening to a few retail investors. They don't know what AMC even stands for. They don't even know what the company does in some capacity, which is pretty amazing. They just see the ticker. But basically shores up their balance sheet. And it was coined as in order to make acquisitions in the future. So it's M&A activity, giving them cash to acquire company, shore up their balance sheet, all these different types of things. So there's a few ways to look at this. Adam Aron, which is the CEO, this is a smart move by him, no doubt. The equity's up so much, it's cheaper for them to basically raise that capital because they can get more for their money, basically. So he's been quite active on Twitter. He's basically—
So hang about. He wins, Mudrick wins. Who loses here? There's got to be someone who loses, right? Because surely the stock's got to come off and some of the retail money is going to get hit, but then the stock bounces back up by the close. Or who's the loser in that transaction?
Exactly. So his tweet was, in our view, this is not mindless dilution, but rather this is a very smart raising of cash so we can grow this company. To many of you on Twitter, to grow your company. Watch out, naysayers, AMC is going to play offense again. Here we come. So he's definitely playing into it. It's what I would do, of course, um, in that. So he's kind of playing into that, we're all in it together. Mudrik, when I did the LinkedIn post on this, it was really interesting because, um, you know, it looked like, you know, they're in it. Mudrik, they're a big believer of this company. A couple of hours later, they then sold their whole stake and said this is massively overvalued. So, which is insane, right, that SEC would allow something like this. It's a private sale and then they literally sold on the first day after investing in it. But again, the hedge funds are winning. Who loses is always going to be retail. And it's not going to be all of retail. There's going to be people that are making huge sums of money to pay off their mortgage and changing their life, pay off their student loans. But it's the ones that then buy at the top so the hedge funds sold that position, who are they dumping on? Of course, it's the retail traders. Of course, they're the ones that are losing. AMC is the winner. Adam Aron, the CEO of AMC, is the winner. Mudrick Capital is a winner. All those hedge funds that jumped on this momentum strategies are the winners. Some of the retail will be winners that have made that huge amount, but it's obviously the people that get dumped on right at the top, which happened with GameStop and it happened with AMC. Yeah, yeah.
So it's interesting, it's like you said, going full circle. It used to be David versus Goliath, but the narrative has kind of changed now, and that it's just a new realm of hedge funds again utilizing the situation for their benefit, which we know they're very good at.
Of course, it's, it's just seizing on opportunity, um, and unfortunately it is those people that are going to get hurt. But let's kind of again take a look at the structure and You know, it's insane when you look at the stats in terms of, you know, why this is happening and all the pops and all the squeezes. But it— I think it was one day last week, AMC call options nearly traded as much volume as the SPY, so the S&P 500. So AMC was up there with, uh, SPY, which is just to even comprehend that this is, you know, imagine how much ETF volume and how many holders own and trade S&P, uh, the SPY ticker, uh, you know, to have that call option volume, uh, of AMC up there is huge. So what this means from a structural perspective is when they're making markets— and when I say making markets, I mean the market makers, the liquidity providers that are making markets in this stock— they have to delta hedge. What this means basically is when retail, they buy options, the market makers are short those options. They then have to hedge their positions by buying the stock. So they buy AMC stock, they're short the options. That's how they hedge their delta risk basically. As the stock then pops for fundamental reasons, but also the technical ones, Then there can be short squeezes like we've seen in many capacities. Lots of hedge funds are short still, you know, there's, I think, you know, a ton, billions out short, um, like there was with GameStop. Uh, then when those stops get run, then obviously that pops. So there's the short squeeze element. Then the market makers have to buy even more stock because they're short the options, and when the stock goes up, then their, their risk basically goes up. So they then need to adjust their risk. Um, then basically as they're adjusting their risk, the market makers then need to hedge that risk even more, and then that's where the gamma squeeze happens. So you've got—
so you're telling me we can go to 2,000% on the year?
So the funny thing about this was there was, I think it was a TikTok or a video, whatever, and the guy was like, oh, you know, AMC can go to $1,000 a share. Which is $25 trillion. If you do the share price of $1,000 times the shares outstanding, that gets you to $25 trillion, 25 times Apple. So this is where the use of equity valuations and multiples, whatever, from retail, the unsophisticated kids, is they just see an arbitrary number, right? 100, 500, 1,000, it can go anywhere, just like, you know, Dogecoin or whatever. Um, but that's where the lack of knowledge comes in, right? Because if you think that AMC is going to be 25 times larger than Apple, not going to happen, right? They're just picking a number, they don't understand market cap. So that was a pretty, pretty funny observation.
Yeah, well, cool. Well, I think that gets us fully up to speed. But, um, any questions at all, feel free to leave a comment below. I'm sure Eddie will be happy to explain. I know there was anyone who's new, couple of bit more sophisticated kind of wording and theory there, but Eddie, I'm sure, is happy to help. So just let us know in the comment section below. All right, Eddie, thanks very much.
