Don’t expect another wave of meme madness to save AMC Entertainment (NYSE:AMC). Although once one of the “meme kings,” it may be more accurate now to describe AMC stock as one of the meme “also-rans.” AMC’s price action will be driven by fundamentals, which is bad news for investors, as the stock should continue to fall.
We’re talking, of course, about shareholder dilution. The show is far from over, and not in a good way. Once the star of a “meme saga,” this stock is now the star of a “dilution saga.”
AMC Stock and Recent Debt Restructuring News
Outside of discussion about recent box office trends, there haven’t been a whole lot of headlines out there about AMC Entertainment lately, except for the latest news regarding the company’s debt restructuring plans.
As Bloomberg reported June 21, AMC has recently been negotiating with its lenders, about both ways to reduce debt and to extend near-term maturities. AMC’s long-term debt currently stands at around $4.5 billion, $2.8 billion of which comes due two years from now.
As we pointed out in our last AMC stock article, this high debt position leaves the “saga” surrounding shares at risk of reaching the “final chapter.”
In other words, a Chapter 11 bankruptcy reorganization. If AMC were to enter Chapter 11, it would almost certainly lead to a total wipeout for anyone holding the company’s common stock.
Yet while these negotiations could lead to an outcome that in turn prevents AMC Entertainment from reaching this “chapter,” all this may be due to lessen future losses, rather than lead to a rebound.
Why? As you might have guessed, AMC’s only real solution to this debt problem is to sell and or issue more shares, leading to a further downward spiral for shares.
Barring a Boffo Box Office, the Slide Shall Continue
Last month, there was a short-lived bout of modest optimism about improving fortunes for the movie theater industry. AMC stock didn’t exactly participate in this brief rally. Still, this event does underscore that there’s still a bit of cautious optimism out there about the movie theater industry finally getting back to its “old normal.”
However, there’s still not much out there to suggest that 2024 box office results will top expectations. As we’ve cited before, because of last year’s Hollywood Union strikes, the summer box office is still expected to decline compared to 2023 levels.
All bets are off for 2025. However, until the initial results come in more than six months from now, it’s purely speculative to assume a more boffo box office is just around the corner.
If a further recovery in movie theater attendance remains underwhelming, AMC is likely to not experience much improvement in its operating results. If fiscal performance remains constant, but the aforementioned dilution persists, this will most likely lead to a further price decline for AMC shares.
Trading for just under $5 per share today, a slide to the low single-digits could take shape in the coming months.
The Verdict: Exit the Theater, Immediately
Although the situation with AMC hasn’t taken a big turn for the worse, it certainly has not experienced much improvement. A lack of news may keep shares rangebound for now, but the next encore of big losses may be approaching.
AMC’s next quarterly earnings release is a little over a month away. Besides reporting another quarter of poor operating results, the company could provide an update on its debt restructuring plans.
Although anything’s possible, and said update could end up being better-than-feared, it may be best to play it safe. If you currently own AMC stock, consider it time to exit the theater, immediately.
AMC stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
