Discover more from Margins by Ranjan Roy and Can Duruk
Ape Armies and Investor Relations
A boomer no-pants Zoom and 💎🙌
On January 28th, when Gamestop stock hit a high of $483 a share, I wrote, "when the tourists leave, Gamestop's stock will come crashing down." I was temporarily right (GME fell to the 30s), and then proven completely wrong: the tourists never left.
There have been so many times over the past decade I’ve thought, “things can’t get weirder and stupider.” And then they do.
At that time I wondered about how Gamestop management would handle the January stock price rise:
Gamestop's CFO is a guy named Jim Bell. I feel he might go by Jimmy B. He was formerly the CFO of the PF Chang's holding company (awesomely named Wok Holdings). He was a Naval Officer. Jimmy B. seems like the type of guy you'd want to handle such a high-pressure situation.
Well Gamestop CFO James Bell clearly handled the pressure in his own way. He announced he'd be leaving the company at the end of February, which allowed for the accelerated vesting of his equity, netting him tens of millions of dollars for less than two years of work. The Gamestop CEO, who started at the company in April 2019, and is walking away with potentially a couple hundred million. The WSJ has a good writeup of all the numbers.
AMC, Adam Aron, and Apes
While the old guard of Gamestop golden parachuted their way out of the gaming game, things are very, very different over at AMC. Last Tuesday I was on CNBC’s TechCheck discussing AMC (Shameless plug alert that my co-host Can will give me shit for):
At around 0:50 I say that Adam Aron, the CEO of AMC, is the most interesting character in this entire AMC story. When the show aired, I thought that statement was maybe some kind of under-the-radar, Margins-y insight. He’s certainly a known quantity now.
Before this Week
Let’s look at Adam Aron in the news before this week. If you searched for Adam Aron before this week, his name was only in headlines about AMC’s mask policy back-and-forth last summer.
But, in early May, on their most recent earnings call, he quietly pledged allegiance to the lords of the meme. First, he divulged that AMC had 3.2 million individual shareholders (as of March 11) who own about 80% of the 450 million shares outstanding and that he was here for it:
These individual investors likely own a majority of our shares,” Aron said during Thursday’s call. “They own AMC. We work for them. I work for them.”
There's almost something beautiful in it. The average person now owns this company and the CEO is saying he works for them.
And then that earnings call got a lot more 2021.
You see, Apes Together Strong has been a running meme in r/WSB world:
Traders call themselves the Ape Army. This led to a donation push back in March by the r/WSB folks to adopt a number of gorillas. In six days they raised over $350k for the Dian Fossey Gorilla Fund (Note 1).
On that May earnings call, Aron announced AMC’s Charity Cares and Aron personally would be donating 100k total to that same exact fund.
He went full meme. Not only did he acknowledge the new majority ownership of retail investors, he paid full homage to the memes, and he did it in the language of the meme. He told the Ape Army that he respects them and understands them. It wasn’t done in some cheesy corporate how do you do fellow kids way either. It was the perfect insider-y reference that seems absurd or irrelevant to an outsider. It was perfect memespeak.
Okay, before this week, gorilla donations and proclamations of democratization on an earnings call were how Adam Aron was going full memestock. But this week, holy hell.
On Wednesday morning, AMC announced a new program that would give perks like a free tub of popcorn to its retail investors. This was now official policy. That consumer marketing-meets-corporate governance effort was officially being put into place.
But, again, it’s 2021, and things couldn’t stop there.
On Thursday evening, my YouTube homepage prominently told me that Adam Aron was being interviewed by someone called Trey Trades, whose Twitter bio succinctly says, “fighting for the market of the apes.”
Okay, a 66-year old CEO of a public company with a $24 billion market cap going on a memestock YouTuber’s show might be quite a radical departure from the norm. But this CEO’s company is worth $24 billion because of these very apes so I guess it’s not that weird.
Then came a moment that makes 2021 smile with pride.
Yes, as his camera fell, AMC CEO Adam Aron was wearing no pants during the interview.
I will refrain from any references to emperors and clothes, but let’s note that Adam Aron was born in 1954, is a co-owner of the Philly 76ers, and is the former CEO of fancy things like Vail Resorts and Norwegian Cruise Lines. He's a Harvard undergrad and Harvard MBA. This guy is as establishment as it gets, and I imagine, as polished as it gets.
Sure, a Boomer getting caught no-pants-Zoom is not an unfathomable thing, but Adam Aron has been at the top of a very buttoned-up game for a long time. Is he really a no-pants-Zoom kind of guy? I mean, he was even wearing a shirt and tie!
I can’t stop thinking if the lack of pants was a bit of engineered virality by his already-proven-to-be-genius social team. I also can’t help but wonder if he had on those gold toe dress socks that my own Dad always wore. I know, it’s weird, but this is a weird time.
This is such a fascinating combination of consumer marketing and investor communications. For a consumer business that was in both a financial and secular crisis, could these crazy moves actually work? Customer acquisition in any business is expensive and tough but now you have an army of 3 million retail investors who are both financially and emotionally tied to you. Maybe they’ll buy a movie ticket. Even if they don’t, you are continuing to issue equity and paying down your debt. AMC wanted to be authorized to double their share count in early May but it was voted down. As of this week, AMC is still trying to issue more equity and people have kept buying the entire time.
No pants Zooms and gorilla memes might just push through a transformational recapitalization of a 100-year-old company. That would be the most 2021 thing possible.
I’ll end this by saying, while I empathize with financial regulators right now, the markets feel like a referee losing control of a game—where it starts with a few small things no one sees are mishandled, but soon it turns into this:
I get that things are confusing. Is a donation to a gorilla conservation fund an investor pitch? When Elon tweets emojis, whether they are 💎🙌 or a 💔, and the price of crypto fluctuates that clearly affect the profitability of the very public company Tesla, there are no ramifications.
In terms of regulators, this week we found out right after getting a sternly worded letter from the SEC about previous tweets, Elon tweeted:
For the less crass amongst us, he told the SEC to Suck Elon’s Cock, but just imagine in a courtroom, an SEC lawyer trying to explain this and Elon saying he really meant “Save Elon’s Company” or something ridiculous (Note 2). He’d probably be dressed up as Wario.
When emojis and gorilla donations are a new form of investor communications, it’s understandable that traditional regulatory frameworks won’t be sufficient. But we need to catch up. This stuff isn’t going away.
And as AMC has shown us, it can be a very real, strategic, and potentially reasonable thing in the world of capital allocation. In a world where Blackrock, State Street, and Vanguard basically own the entire stock market, there’s still something Bernie Sanders-beautiful about the idea of millions of regular people coming together, powered by social media, to own a company. It’s even more inspiring to think that these investors could then become a consumer force, lowering marketing costs and increasing profitability. The stock rises because they’re buying the stock and their products, and maybe the CFO meets more with the CMO and come up with customer acquisition-meets-capital raising strategies (Note 3). It sounds kinda nice, no?
Of course, this could also just all end up as one big pump-and-dump, but hey, it’s 2021, who knows how this ends?
Note 1: Dian Fossey, the lady the conservation fund was named after, has a crazy story.
Note 2: My co-host Can wrote the other day about how the key to our current-day grifting is utter shamelessness. Just reading that Elon SEC tweet reminded me how true that is.
Note 3: I’m really curious how many consumer companies are trying this AMC style of capital raising. Right after FIGS IPO’ed I’ve been getting promoted tweets nonstop (and have never been on their website and am certainly not a doctor). I’ve noticed the same thing happening with other companies. Are they already allocating marketing channels to drum up retail investor interest?