Selling AMC Stock Could Be a Genius Move
If you bought $1,000 worth of AMC Entertainment Holdings (NYSE: AMC) stock at its all-time high of $62 in June 2021, you would have roughly $100 today -- a decline of 90%. While the movie theater operator seems to be recovering nicely from the COVID-19 pandemic in 2020 and 2021, massive levels of equity dilution could leave investors holding the bag.
Few industries were harder hit by the COVID-19 pandemic than the cinema industry. Not only did consumers avoid the tight spaces and poor ventilation of crowded theaters -- major studios like Walt Disney postponed major films or moved them to their streaming platforms. At the height of the crisis in 2020, AMC's revenue collapsed by 77% to $1.24 billion against the prior year, and it lost $4.59 billion.
AMC's stock was later caught up in the meme stock movement, which involved retail investors buying up heavily shorted companies to try to trigger short squeezes. The company skillfully took advantage of this situation. Instead of over-relying on debt to raise capital during the crisis, it issued new shares at their inflated valuation. As of the second quarter of 2022, AMC has 517 million shares outstanding compared to just 52 million this time in 2019 -- an almost tenfold increase in just three years.
Source Fool.com
