The euphoric rise of more than 2,800% in shares of the AMC (AMC.US) movie theater chain during the 2021 bull market peak was almost completely erased. At the time, the stock's rally almost saved the company from bankruptcy. From the June 2021 peak, the stock has lost nearly 97% to date. Today the bulls are trying to reverse the disastrous trend, the stock is up 17% but last week alone the shares lost nearly 60%. The stock has been falling on heavy volume recently, so today's upward move may signal the exhaustion of the sellers' strength.
- The company continues to face financial challenges in the entertainment industry but is gradually improving the business - but not enough to make its achievement of profitability in a challenging macro environment obvious;
- AMC's business is improving gradually, with quarterly revenue returning to pre-2020 levels ($1.34 billion) in Q2 - yet the stock has not been able to sustain the speculative gains of 2021. Long-term debt is still 230% higher than the company's assets;
- The company executed its previously announced 10-to-1 reverse split strategy on August 24, a strategic move designed to increase the value of the stock (perhaps to avoid a possible fall out of the indices) and possibly also 'stimulate' demand for the shares;
- The AMC recently included preferred units, previously traded under the ticker APE (AMC Preferred Equity Units) in its capitalization by increasing the number of shares from 542.2 million to 550 million - another 'dilution' investors didn't like.
- The move with the adoption of APE units came a day after the completion of a 10-for-1 reverse stock split. Now the company has options to sell 390 million common shares worth close to $5 billion. Investors are concerned after the Bloomberg report that the company will sell shares in the face of debt problems and rising debt servicing costs.
In the absence of announcements from the company, the likely reason for today's rally is an increase in the risk premium for bulls in the absence of big sellers and a lot of concern and negative information contained in the current company valuation.
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AMC (AMC.US) on D1 interval. Shares owed their recent surge to a reverse 10:1 share swap - will the market maintain the 'meme-stock' momentum and retail investors make the AMC topic in the financial press? Source: xStation5
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