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Central Bank Cuts Ties: A Red Flag for AMC Stock Investors?

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  • AMC Entertainment (AMC) had a less-than-stellar Thanksgiving weekend box-office performance.
  • Now, AMC Entertainment seems to be counting on revenue from a Beyoncé concert film.
  • Investors shouldn’t put too much faith in AMC stock now.
AMC stock - Central Bank Cuts Ties: A Red Flag for AMC Stock Investors?

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Can concert films save global movie-theater chain AMC Entertainment (NYSE:AMC) from financial ruin? Should AMC stock investors trust the company after multiple share sales? These are some of the billion-dollar questions surrounding AMC Entertainment – and unfortunately, the answers generally aren’t positive.

AMC Entertainment’s fans, known as “Apes,” are rooting for the company to stage a post-pandemic comeback. That’s understandable, but it’s highly risky to invest in AMC Entertainment in 2023 and 2024. A central bank is reducing its exposure to AMC’s problems, and that’s actually not a bad idea. So, let’s dive in the details now.

Which Central Bank Cut Its Stake in AMC Stock?

Here’s the scoop. The Swiss National Bank, which is the central bank of Switzerland, reportedly sold 828,750 AMC stock shares by the end of this year’s third quarter. Consequently, the Swiss National Bank ended the quarter with only 301,691 shares of AMC.

It’s unclear why Switzerland’s central bank reduced its stock exposure to AMC Entertainment so drastically. Perhaps it just had enough of the share-price losses in 2023, which have been substantial.

Maybe the central bankers got spooked when AMC Entertainment CEO Adam Aron said he was targeted in a blackmail plot. Or, perhaps they noticed that the much-touted Barbie and Taylor Swift concert films didn’t save AMC stock from losing value.

Don’t Count on Concert Films to Rescue AMC Entertainment

Now, AMC Entertainment’s management is undoubtedly excited about the Beyoncé concert film. However, don’t expect AMC Entertainment to rake in massive revenue from this movie. As a Yahoo! Finance reported clarified, “Beyoncé will take home 50% of box office proceeds with AMC collecting a small distribution fee.”

There’s also a trust issue to consider. As you may already be aware, AMC Entertainment has added to its pool of shares before, with Aron declaring, “Some of you fear dilution is a mistake no matter what. You are wrong.”

Is it really “wrong” to fear share dilution, though? Recently, AMC Entertainment filed to sell as much as $350 million worth of the company’s stock shares. Who knows how many more times AMC will issue and sell shares to pay off its debt load?

It’s a considerable debt load, to say the least. Not too long ago, Wedbush analyst Alicia Reese calculated that AMC Entertainment “still has over $4 billion in debt.” Somehow, I doubt that the Beyoncé movie will make an appreciable dent in that debt.

Save Yourself the Trouble and Avoid AMC Stock

It’s not known exactly why the Swiss National Bank slashed the majority of its share stake in AMC Entertainment. Given the company’s willingness to dilute the value of its current shares, however, the central bank can’t really be blamed for reducing its exposure to AMC Entertainment’s issues.

You don’t have to avoid AMC stock just because Switzerland’s central bank reduced its share position. There are other reasons to choose not to invest in AMC Entertainment. So, even if you sympathize with the “Apes” and their cause, feel free to bypass AMC’s problems and invest in a more promising business.

On the date of publication, David Moadel 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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2023/12/central-bank-cuts-ties-a-red-flag-for-amc-stock-investors/.

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