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Why AMC Networks Stock Soared Today

The Motley Fool logo The Motley Fool 5/12/2020 Anders Bylund
graffiti on a wall: Why AMC Networks Stock Soared Today © Provided by The Motley Fool Why AMC Networks Stock Soared Today

What happened

Shares of AMC Networks (NASDAQ: AMCX) traded 22.8% higher at 3:25 p.m. EDT Tuesday. Merger analysis firm CTFN reported that the premium cable network operator is looking for a buyer.

So what

Two unnamed insiders told CTFN reporter Diane Alter that AMC Networks is actively looking for a buyer, and that e-commerce giant Amazon.com (NASDAQ: AMZN) is looking into this opportunity. Earlier this week, Amazon was rumored to entertain a buyout of movie theater chain AMC Entertainment (NYSE: AMC), but Alter's sources suggest that this was a case of mistaken identity -- Amazon's real buyout idea is actually this TV studio, known for managing the Starz premium cable network and creating hit shows like Breaking Bad and The Walking Dead.

a painting in a parking lot painted with graffiti: An artist is painting a mural of a large yellow fish swallowing a smaller yellow fish. © Getty Images An artist is painting a mural of a large yellow fish swallowing a smaller yellow fish.

Now what

Alter noted that she couldn't find supporting evidence of AMC Networks' acquisition-shopping from other sources, pinning this entire jump on the word of one banker and one entertainment-industry lawyer.

That being said, AMC Networks shares have fallen 55% over the last year, and the company could use a quick and clean exit strategy. This idea makes more sense than the AMC Entertainment rumor ever did. The movie theater operator is on life support, and you could argue that the premium TV studio's worries are short-lived.

Either way, it's beginning to sound like Amazon is itching to play a more substantial part in the filmed entertainment industry.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anders Bylund owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends AMC Networks and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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