There is never a dull moment when tracking meme stocks. And now one of the most prominent ones, AMC (NYSE:AMC), is in trouble yet again. In an interview with social-media finance commentator Trey Collins, CEO Adam Aron said short sellers are encircling AMC stock.

This marks yet another twist in a gripping story that continues to add chapters with every passing day. For all intents and purposes, the movie-theater chain was staring down the barrel when Reddit investors rescued the company from the depths of bankruptcy.

Since that time, it has chosen to make hay while the sun shines, raising a substantial amount of cash through equity issues. However, even before the novel coronavirus pandemic struck, AMC was suffering.

That’s because there has been a substantial shift in how Americans watch movies. Box office sales reached their high in 2002 at 1.58 billion tickets, eventually dropping 22% to 1.23 billion tickets by 2019. Simultaneously, we saw an increasing shift towards home viewing, helped greatly by the emergence of streaming companies.

And then Covid-19 hit the industry like a ton of bricks.

Movie-theater chains Arclight Cinemas and Pacific Theaters have already shuttered their doors permanently. Others are massively restructuring their operations to survive this crisis.

Hence, it’s understandable why Aron praised retail investors in his recent discussion — the subreddit r/WallStreetBets essentially bailed out the company, punishing short sellers in the process. But financial realities will eventually push the stock close to its 52-week low of $1.91 per share. I’m afraid the show’s over for AMC stock.

Share Dilution Will Continue to Hurt AMC Stock

AMC is paying the price of survival and it’s a steep one. At the end of 2019, AMC had nearly 104 million shares. As I write this, the movie-chain operator now has some 450 million shares. That’s about a 333% rise in a year.

Now, I get it. AMC needs money to survive this pandemic and beyond. Movie theaters will need several business cycles to get back on their feet.

True, about 25% of the U.S. population has been fully vaccinated as of today. However, it will take time for movie-ticket sales to return to pre-pandemic levels. In the meantime, AMC still needs money to survive.

As such, on May 4, the company is set to host its annual meeting and ask stockholders to greenlight the issue of another 500 million new shares. Aron has said that AMC will not issue any new stock this year, an announcement that pushed shares up 9%.

Nevertheless, the writing is on the wall. If you remain committed to AMC stock, dilution is something that you will have to bear for the foreseeable future.

Fundamentals Have Been Sliding For a While

Although the pandemic has devastated movie-theater chains, the slowdown in ticket sales is a secular trend, as we touched upon earlier. In fiscal 2019, the movie-theater chain reported a net loss of $13.5 million, compared to net income of $170.6 million in the year-before quarter. Bear in mind that these figures are from before the pandemic.

On top of that, out of the last eight quarters, the company has reported an earnings beat just once according to CNBC data. Meanwhile, operating costs are ballooning. As my colleague Vandita Jadeja highlighted in her recent AMC piece, despite the top-line falling by over 75%, operating costs did not fall by as much.

This all leaves the company vulnerable to further dilution and expensive debt raises. It’s a clear red flag for AMC stock investors that are looking for management to take more of a proactive approach with this crisis.

Evolution Has Just Passed You By

Even if AMC survives this crisis — which by most measures it should — it still operates a largely outdated business model.

Streaming is all the rage these days. Netflix (NASDAQ:NFLX), Amazon (NASDAQ:AMZN), Disney (NYSE:DIS) and AT&T (NYSE:T) are firmly entrenched in the streaming wars, pouring billions into original content. As of Q4 2020, Netflix is in first place with over 200 million paid subscribers worldwide, but others are catching up as well and using some pretty innovative techniques.

Late last year, Warner Bros. announced it would debut all of its 2021 movies in theaters and on HBO Max simultaneously in the United States. Meanwhile, Netflix is set to release a new movie every week in 2021.

Against this backdrop, AMC and other movie-theater chains are left to fend for themselves as streaming companies compete for attention.

And even if these announcements did not take place, the writing has been on the wall for a while. Its pretty evident when you pit AMC stock’s performance against the S&P 500 that the company has been fighting a losing battle.

Final Words on AMC

I get the feeling that AMC is on its greatest-hits tour. Yes, you might want to invest in AMC stock out of a sense of nostalgia. But in my opinion, the company’s best days are behind it.

Looking ahead, 5G, artificial intelligence, data analytics and the Internet of Things (IoT) are some of the subjects you need to get behind instead. These areas will be the biggest source of future growth and profitability moving forward.

Basically, the credits are beginning to roll for AMC.

On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence.