AMC Entertainment Holdings Inc’s stock hit a new all-time low on January 4th, closing at $5.58 per share. This represents a staggering 98% decline from its meme-fueled peak of $320 reached in June 2021. As AMC’s meme status continues to evaporate, analysts and investors are left wondering if the company can survive.
Precipitous Decline From Historic Highs
It seems like ancient history now, but in early 2021, AMC was at the epicenter of a months-long retail trading frenzy focused on so-called “meme stocks.” Empowered by no-fee trading platforms like Robinhood and galvanized in Reddit forums like r/WallStreetBets, an army of individual investors banded together to try and orchestrate epic short squeezes.
AMC was primed for such a squeeze due to its heavily shorted shares. As buying activity ramped up in early 2021, AMC’s stock went along for the ride, skyrocketing from around $2 per share in January to over $60 by early June. Egged on by the meme crowd, the stock peaked at an astonishing $320 per share on June 2nd before gravity finally reasserted itself.
|January 4, 2024
|June 2, 2021 (peak)
Since that peak, it has been a steady downward slide for AMC. The stock closed 2022 at $7.61 per share, an astounding 97% below its high. Just two days into 2024, it has already fallen a further 26% to reach a new nadir of $5.58.
This 97% peak-to-trough decline echoes the trajectory of GameStop, the original meme darling, which is also down 97% from its January 2021 highs. The parallel declines signal that the broader meme mania that upended markets in early 2021 has well and truly fizzled.
Bleak Fundamentals Asserting Themselves
Despite the steadfast loyalty of some meme disciples on Reddit and Twitter, AMC’s dire underlying fundamentals are now asserting themselves with a vengeance.
The movie theater chain was already struggling with industry headwinds like rising streaming competition when the COVID-19 pandemic hit. Multiplexes shut down for months, while film releases were pushed back or moved directly to home release.
In mid-2020, AMC only narrowly avoided bankruptcy thanks to a debt restructuring deal. But the subsequent meme rally threw the company an unlikely lifeline, allowing it to raise desperately needed cash via stock offerings over 2021 and 2022.
All in all, AMC cashed in on its meme status to the tune of $1.8 billion in stock offerings. However, instead of shoring up its core business, much of this capital was squandered on unrelated diversification plays like gold and silver miners Hycroft Mining and a major stake in National Cinemedia.
With its core theatrical business still depressed (2022 box office revenue was roughly 30% below pre-pandemic levels), AMC continues to hemorrhage cash just to keep the lights on. Its total long-term debt ballooned from $324 million in Q1 2019 to $5.4 billion by end of Q3 2022.
And now, with its meme halo fading and stock hitting record lows, AMC’s financial predicament looks direr than ever.
2024 and Beyond: Survival in Doubt
AMC closed 175 locations in 2021-2022, but some analysts argue it needs to shrink its footprint much further via chapter 11 bankruptcy to return to profitability. As one Barron’s article put it:
“We believe a Chapter 11 restructuring could leave shareholders with nothing.”
Others believe bankruptcy may still be avoided, but only by massive dilution via additional stock offerings:
Morgan Stanley analyst Benjamin Swinburne sees the company needing to raise another $600 million in 2023 alone.
Either way, the road ahead looks rocky for AMC shareholders, assuming the company manages to avoid liquidation altogether.
AMC CEO Adam Aron has stated that bankruptcy is firmly off the table for now, and the company ended Q3 2022 with $908 million in liquidity. However, at the current cash burn rate, that may not even last 2023 unless meme mania makes an unlikely comeback or radical spending reductions are made.
UBS analyst Eric Sheridan summed up market sentiment on January 4th note:
“After benefiting from the meme stock rally to raise cash, improving its balance sheet and avoiding bankruptcy, we now expect core fundamentals over the medium term to determine AMC’s stock price return rather than technicals or retail investor interest.”
In other words, even AMC die-hards need to face the disturbing reality: the meme dream for AMC appears well and truly over. With meme fever breaking, 2024 may be a make-or-break year where we find out if this iconic theater chain can rebuild itself from the ground up or finally runs out of funds – and luck.
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