What happened
Shares of AMC Entertainment Holdings (NYSE:AMC) continue to fall, and were down 6.6% Tuesday morning on no company-specific news, but instead because the momentum behind meme stocks fading. GameStop (NYSE:GME) was down over 3% as well.
The theater operator’s stock is down more than 17% over the last five trading days.
So what
The retail investors trying to maintain AMC’s elevated stock price as a means of forcing the hand of short-sellers could have a long wait ahead as hedge funds have the financial wherewithal to outlast them.
Image source: AMC Entertainment.
The shorts also have AMC’s fundamentals on their side, since the theater industry is in decline. Over the weekend, even IAC/InterActive (NASDAQ:IAC) chairman Barry Diller said movie theaters are dead and “will never come back.”
They might limp along, and with AMC being the biggest chain, it could outlast others. But their heyday seems long past.
Now what
AMC’s supposed bulls did their stock a disservice by forcing the theater chain to withdraw its plan to raise cash from its elevated stock price by selling 25 million shares. The theater operator could have used the money to bolster its finances, much as the leisure stock could have when a 500-million share offering was thwarted earlier this year.
Now AMC Entertainment will have to scrounge among its seat cushions to find money to continue operating amid weak attendance numbers.
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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