AMC Entertainment (NASDAQ:AMC) stock and other so-called meme stocks fell Aug. 22 after AMC issued preferred shares trading as AMC Entertainment Holding Preferred Equity Units (NYSE:APE) stock.
After some initial excitement, AMC fell from a high of $13.05 to close the day at $10.19 per share. It rose slightly overnight and opened Aug. 23 at $10.72. Analysts saw the preferred shares as a “meme friendly” way to raise cash.
Investors asked whether the meme-stock boom of 2021 is now over. Wedbush responded with a downgrade of AMC stock and a price target of $2 per share.
What Does This Meme?
AMC stock was actively traded on Aug. 22, with several trading halts. These were noted in a tweet by AMC CEO Adam Aron. Critics on Reddit blamed U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler for the halts. On Stocktwits, bulls celebrated the return of options trading on AMC. One predicted another short squeeze.
Fundamental analysts noted that gains in APE probably offset losses in AMC. They expressed concern, however, about a possible bankruptcy filing by the owners of rival Regal Cinemas. They called that bearish for the movie theater business.
The other meme stocks of 2021, GameStop (NYSE:GME) and Bed Bath & Beyond (NASDAQ:BBBY), barely moved as the Dow lost 643 points. Small investors, organized on Reddit, piled into the meme stocks last year but failed to sell at the highs despite urging from traditional analysts like Jim Cramer.
AMC Stock, APE Stock: What Happens Now?
Knowing when to sell is the difference between winning the speculative game and being left with losses when the game is over. The man who led the meme-stock charge, GameStop Chairman Ryan Cohen, sold his BBBY holdings recently.
It’s possible that meme traders will now look for other targets, recognizable companies with high short interest. It’s possible that there will be a rush to movie theaters and that AMC will rise again, this time on fundamentals.
It’s also possible that I will win the lottery.
On the date of publication, Dana Blankenhorn held no positions in any company mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
