AMC Is a Wreck

The AMC Entertainment Holdings Inc. (NYSE: AMC) stock price has dropped to just above $7, very near its 52-week low of $6.81 and well below its period high of $45.95. People have traded the stock in a frenzy, pushing it up or down by double-digit percentages some days. The fact is that the company and its model are no longer viable. Even at $7, the stock is overpriced. The day when people attend movies in the theater is mostly gone.

AMC has issued a growing number of AMC Preferred Equity Units, which tends to push down the price of the common stock. A new plan to sell more of these, worth a total of $1.4 billion, has made this problem even worse. According to MarketWatch: “The APEs, which snapped a five-day losing streak by closing unchanged on Friday, have plunged 45% since closing its first day of trading on Aug. 22 at $6.00. Over the same time, AMC shares have sunk 26.3% and the S&P 500 SPX, +1.97% has dropped 10.6%.”

AMC lost $122 million in its most recent quarter, which is on top of a $344 million loss last year. Adding cash to the balance sheet does not solve this. It only extends the time until when AMC starts to disappear completely.

Management recently said that the weeks of August and September would be slow, with an expected pickup in the fourth quarter. This largely is based on release dates of blockbuster films like “Top Gun: Maverick.” These blockbuster releases in theaters have become fewer and harder to find. Many of the new “studios,” which are the huge streaming services, do not release their most popular movies into theaters at all. And Netflix, Amazon Prime Video and Disney+ have at least 100 million paid subscribers among them in the United States.

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Among the most recent examples of releases directly to streaming is Amazon’s “Lord of the Rings: The Rings of Power.” It set streaming records. The new “House of the Dragon” has done even better. These could have been a bonanza for AMC.

AMC’s ability to continue in business, for the time being, has led investors to move into the stock, at least from time to time. The period when wild swings offered the chance for investors to make money is likely over. Shareholders are stuck with a $7 stock that will not go much higher and may well collapse further.

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