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Why AMC Stock Dropped Today

By Joe Tenebruso – Updated Jun 9, 2020 at 6:00PM

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With its theaters closed during the coronavirus pandemic, the movie theater chain generated brutal losses.

What happened 

Shares of AMC Entertainment Holdings (AMC -1.83%) fell 7% on Tuesday, following the release of the movie theater company's first-quarter earnings release. 

So what

AMC's revenue plunged 21.6% to $941.5 million, as coronavirus-related social distancing guidelines drove it to close all of its theaters on March 17. With little revenue coming in after that time, AMC posted an adjusted net loss of $231.6 million. AMC also recorded a $1.85 billion impairment charge, as it marked down the value of many of its theaters.

Empty movie theater seats.

AMC Entertainment stock fell after its empty theaters generated large losses. Image source: Getty Images.

To stem the bleeding, AMC furloughed all of its U.S. employees and most of its global workforce. It also raised $500 million in cash from debt issuance, and it's attempting to negotiate rent deferrals with its landlords.

"We are confident we are taking the necessary steps on a broad array of fronts to ensure AMC's future success as we navigate these turbulent and uncertain times," CEO Adam Aron said in a press release.

Now what

AMC is in a dangerous position while its theaters remain closed. And even when they reopen, it's uncertain if enough people will head back to movie theaters during the pandemic. Until a vaccine or effective treatment for COVID-19 is found, many people may instead choose to watch movies in the safety of their own homes. That could be a big problem for AMC -- and its shareholders.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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AMC Entertainment Holdings, Inc. Stock Quote
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