By Saqib Iqbal Ahmed, Sinéad Carew and Devik Jain

(Reuters) - Shares of retail investor favorite AMC Entertainment Holdings Inc nearly doubled in price on Wednesday, extending a breathtaking rally and reinvigorating the meme stock phenomenon that has captivated investors.

The theater chain operator's shares closed up 95.2% at $62.55, a fresh record. At the close, AMC's market value stood at $28.17 billion, more than ViacomCBS and Kellogg, as well as fellow meme-stock GameStop.

In an apparent nod to the retail investors that have hyped the stock in forums such as Reddit’s popular WallStreetBets, AMC CEO Adam Aron on Wednesday announced an initiative that offered even the smallest shareholder a free large popcorn if they signed up to a regular newsletter.

Among other so-called meme stocks - companies popular with a new generation of social media centric traders on WallStreetBets and other online forums - security software provider BlackBerry and headphone maker Koss Corp rose 31.1% and 68.6%, respectively.

The massive rise in AMC's shares, which are up about 2,850% from just over $2 at the end of last year, is beginning to resemble the wild ride in shares of GameStop earlier this year.

"It's meme stock 2.0.,” said Steve Sosnick, Chief Strategist at Interactive Brokers.

GameStop shares rose more than 1,600% in January, buoyed in part by bearish investors unwinding their bets against the heavily shorted stock in the face of a massive buying surge.

'GAMMA SQUEEZE'

Some of the upward price move in AMC is likely being driven by market makers buying up stock to hedge their exposure from selling options, an event known as a “gamma squeeze,” analysts said.

"People have learnt what tactics work under these insane circumstances. They are using a very similar play-book," Sosnick said. Call options that would pay off if the shares topped $73 by Friday were the most heavily trade AMC options on Wednesday, with about 233,000 contracts changing hands.

With shares approaching that level, market makers who sold these and other similarly bullish contracts were left with no choice but to buy up AMC stock to hedge their own risk, thereby exacerbating the rise in the share price, analysts said.

"Market makers are just chasing the stock," said Matt Amberson, principal at options analytics firm ORATS.

Wednesday’s near doubling of the stock price will likely test investors that have shorted AMC. Bearish investors were down $5.2 billion for the year and lost nearly $2.8 billion on Wednesday alone, data from S3 showed.