Cineplex operator AMC Entertainment (NYSE:AMC), which, while broadly embattled, received a lifeline from meme-trading sentiments, saw its shares continue to move higher on Thursday. In the prior session, AMC stock skyrocketed as shareholders pushed back against management’s proposal.
A key issue that the leadership team wanted to set in stone was an executive compensation plan. However, shareholders rejected the proposal and instead opted for an equity incentive plan, per Seeking Alpha.
Another one of AMC’s proposals centered on declassifying its board of directors. Under a classified board, directors serve what IRMI describes as “staggered” terms: some directors vie for reelection in a given year while others do not. Curiously, staggered boards have a correlation with lower valuations and/or inefficient corporate decision-making.
AMC Stock Focuses on Meme Trading Sentiment
In theory, the pushback by stakeholders of AMC stock is significant because it communicates broad frustrations to management. As well, executives may be forced to make a good-faith effort to turn the business around. However, that’s likely easier said than done.
Sadly, AMC stock suffers from a fundamental dilemma: its mainline product is increasingly losing relevance. Market data surveys reveal that more than half of respondents prefer watching movies at home. That’s likely to be exacerbated due to technology and economies of scale. As CNN pointed out, big-screen television sets are cheaper than ever.
Effectively, the box-office experience can be somewhat duplicated at home. That leaves AMC stock largely dependent on meme-trading sentiments, which can be fickle.
Thanks to Keith Gill, the retail trader known online as Roaring Kitty, reigniting a meme-fueled rally, AMC has been a fortuitous downwind beneficiary. However, the cineplex operator still faces deep-seated problems. In the past 52 weeks, the stock has been down more than 87%.
Why It Matters
While shareholders may view the latest pushback as a victory, they still must contend with a long struggle to restore credibility in the business. Part of the challenge is that the executives – those closest to the business – don’t seem particularly enthused about AMC stock.
Over the past three years, all insider transactions — amounting to 3 million shares — have been sells. While there are many reasons for insiders to sell their own securities, the fact that no insider bought shares within this period is rather telling.
On the date of publication, Josh Enomoto 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.
