Why Is AMC Stock Plunging 40% Today?


  • AMC Entertainment (AMC) stock fell 38% over the weekend.
  • Shares fell thanks to declining meme trade enthusiasm, shareholder dilution and the possible bankruptcy of rival Cineworld (CNNWF).
  • AMC has been boosting meme stock traders lately with free NFTs, however.
AMC movie theater front glowing in the setting sun with the name shining bright red. AMC stock.
Source: Ian Dewar Photography / Shutterstock

AMC Entertainment (NYSE:AMC) stock fell nearly 40% over the weekend as the meme stock boom unraveled. A money-losing movie theater chain, the company had traded at far more than its fundamental value since 2021. Small traders organized on social media — including on Reddit’s r/WallStreetBets — helped maintain the high price of shares.

AMC had a market capitalization of $9.2 billion on Aug. 19, despite analysts expecting sales of $4.3 billion for full-year 2022. After the recent drop, though, AMC has a much more reasonable $5.8 billion market cap. As of this writing, shares trade closer to the $11 mark.

That said, AMC is launching “AMC Preferred Equity” (APE) shares today. CEO Adam Aron has been using the meme stock phenomenon to raise capital and get AMC into the non-fungible token (NFT) space. The new APE shares will be issued to existing shareholders and begin trading later this month

Here’s what investors should know about AMC stock moving forward.

What’s Going on With AMC Stock? 

Like AMC stock, meme favorites Gamestop (NYSE:GME) and Bed, Bath & Beyond (NASDAQ:BBBY) have also dropped over the past few days. This decline came after Gamestop chairman Ryan Cohen closed out his position in BBBY stock. 

AMC stock is also being hurt by its own actions and industry. For one, the company is diluting existing shareholders with the new shares. AMC’s main rival, Regal Cinemas owner Cineworld (OTCMKTS:CNNWF), also recently confirmed it may file a Chapter 11 bankruptcy. Some analysts believe the Cineworld news can help AMC gain market share, but the potential bankruptcy does cast doubt on the future of the theater business

That said, Aron has also landed AMC firmly in the NFT space. The CEO launched an investment club called AMC Investor Connect, which now has more than 700,000 members. He has given AMC stock shareholders free “I Own AMC” NFTs. He even worked with Sony (NYSE:SONY) to give NFTs to customers who pre-purchased Spider-Man tickets. 

What Happens Now? 

All told, today’s declines could be game over — not just for AMC stock but for the whole meme stock craze. Really, the Cohen news is the most telling. Ryan Cohen had been a hero for small meme traders, but his recent BBBY stock sale paints him as just another Wall Street shark.  

The only good news is that Aron has raised capital for AMC thanks to meme traders and NFT players. What the CEO does with that money will determine the future of AMC stock.  

On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. 

Article printed from InvestorPlace Media, https://investorplace.com/2022/08/why-is-amc-stock-plunging-40-today/.

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