What happened
Movie theater operator AMC Entertainment Holdings (NYSE:AMC) seems to be losing its luster with the retail trader crowd that now makes up 80% of the company's shareholder base. AMC stock is down 30% in the past two weeks, and dropped as much as 14% Thursday morning. AMC shares have recovered some, but remained down 6.2% as of 10:05 a.m. EDT.
So what
Some of the negative sentiment came earlier this week when AMC CEO Adam Aron said he was tabling a shareholder vote on a proposal he supported to add another $25 million shares to the company's share count. Aron wanted to sell more stock to raise additional capital even after the company has raised almost $3 billion in new equity and debt over approximately the last year.
Image source: Getty Images.
Shareholders wanting a turnaround in the business may also be reacting to news that more movies will be released onto streaming television with shorter durations playing solely in theaters. Beginning in 2022 Comcast's (NASDAQ:CMCSA) Universal Pictures will be moving its releases onto its parent company's Peacock streaming service no later than four months after theater releases, according to Reuters.
Now what
Investors looking past the meme stock frenzy that has encompassed AMC shares may be realizing that the business itself still needs to recover. And news that potential hit movies will be available in homes to stream sooner could be damaging to the theater business.
Even with the stock's recent decline, AMC shares are up more than 1,900% year to date. It will take much success in the underlying business to catch up to the current valuation. Some traders appear to be noticing and are taking profits.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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July 08, 2021 at 09:39PM
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