AMC Entertainment’s (NYSE:AMC) financial troubles continue as it resorts to share dilution and a reverse stock split to address its growing debt issue.
AMC’s recent capital raise, while necessary, has caused discontent among shareholders, leading CEO Adam Aron to defend his decisions. This reveals a growing division among AMC shareholders.
The outlook for 2024 box office results remains dim due to the Hollywood strike, and expectations for the film “Dumb Money” boosting AMC stock are fading.
AMC’s meme stock glory days are over. The film industry is still struggling post-pandemic, and AMC’s financial situation is precarious. It’s advisable to add AMC to your list of stocks to sell before it faces more challenges. Lets’ dive in a few more of the reasons to sell in this article.
Recent AMC News
AMC Entertainment’s CEO, Adam Aron, is using Twitter (formerly known as X) to conduct polls and gather suggestions for new products the company can sell, engaging with over 300,000 followers and AMC stock enthusiasts.
One poll seeks input on naming an ale, with “Great Ape Ale” leading at 60.2%. Another poll focuses on wine names, with options like “Chateau Simian” and “Saint Simian.”
These ape-themed choices resonate with investors from the meme stock era. However, it’s unclear whether this stunt will move the needle in any way in terms of the company’s finances.
Investors want results, and I view this move as one which is simply a distraction from the company’s perilous financial situation right now.
Aron Reassures Investors
Aron addressed concerns around the company’s recent capital raise on X, acknowledging dilution concerns, but looking to re-focus investor’s attention to upcoming film slates and the company’s growth prospects.
However, while Aron has undoubtedly used AMC’s stock surge to his advantage in the past, it’s becoming clear that future equity raises are likely going to affect the company negatively.
It’s my view that ongoing strikes and other concerns actually diminish any sort of positive narrative around movie slates. While increased equity improves AMC’s balance sheet and cash reserves for seizing opportunities, it also limits the upside investors looking to put capital into this company now receive.
Why AMC Can’t Be Helped By “Dumb Money”
The release of Dumb Money, a movie recounting the 2021 GameStop (NYSE:GME) short squeeze, sparked optimism for GameStop and AMC Entertainment. This movie will undoubtedly generate hype. It’s a great story about the David vs. Goliath battle that took place in the stock market in 2021.
Retail investors won the first battle, but the war appears to be lost.
Indeed, it’s crucial to take a broader perspective. While the film may briefly boost GME and AMC stock in the near-term, this move is unlikely to be sustained.
GameStop and AMC are unattractive investments due to their outdated business models and poor underlying fundamentals. Long-term investors have plenty of value stocks to pick from with much more positive future outlooks. My recommendation would be to look elsewhere for growth.
What Now
Analysts expect more share dilution for AMC, and traders may learn tough lessons as the stock loses value. Shareholders must be ready for significant investment risks, according to AMC Entertainment’s own statement.
AMC may not hit rock bottom, thanks to occasional blockbuster films, but its debt remains a serious concern. The meme-stock frenzy has waned, and it’s time to leave the memes behind and move forward.
On the date of publication, Chris MacDonald did not have (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.
