AMC Drops As Cineworld Bankruptcy Highlights Industry Risks

Key Insights

• AMC stock drops as AMC Preferred Equity Units start trading on the New York Stock Exchange. 
• Cineworld bankruptcy puts additional pressure on AMC shares. 
• The situation in the industry remains tense. 

AMC’s APEs Start Trading On NYSE

Shares of AMC Entertainment Holdings are under huge pressure at the start of the trading session as traders react to the special dividend in the form of the AMC Preferred Equity Units and the bankruptcy of Cineworld.

Holders of AMC common stock received one AMC Preferred Equity Unit for one AMC share they owned. AMC Preferred Equity Units have started to trade on NYSE under the symbol “APE”.

AMC Preferred Equity Units can be converted into common stock if the company makes such a proposal and investors vote to approve an increase in the number of the authorized shares of common stock.

Cineworld Bankruptcy Is The Main Driver Behind The Sell-Off

The owner of the Regal chain in the U.S. found itself in a tough financial position due to the lack of blockbusters, which had a negative impact on its revenue.

AMC has recently released a statement regarding Cineworld’s problems. The company’s CEO commented: “At AMC, as we have publicly disclosed previously, the film slate in the third quarter of 2022 is expected to be relatively weak. However, we continue to be quite optimistic about the increasing demand for our portfolio of movie theaters in the fourth quarter of 2022 and calendar year 2023.”

The market is not that optimistic. While AMC benefited from the rise of meme stocks, the industry fundamentals remained weak. The growing adoption of streaming puts movie theaters at a serious risk. In addition, the lack of content puts more pressure on the struggling industry.

While AMC is trying to please the meme stock crowd, it remains a movie theater business that shares the problems of the industry. AMC stock may attract speculative traders who are willing to bet on a rebound after the major sell-off. At the same time, the stock’s longer-term potential will depend on the situation in the industry.

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