What happened

Shares of AMC Entertainment Holdings (AMC -0.97%) rose 45.5% in August, according to data from S&P Global Market Intelligence. Shares rose off of extremely low levels as theaters began to reopen across the U.S. after several months of lockdowns. Of course, AMC had fallen to very low levels prior to August as the COVID-19 pandemic forced theaters to close, so longtime shareholders are still looking at a very depressed stock -- in a company for which bankruptcy is still on the table.

So what

Although AMC reported second-quarter earnings to begin the month, the numbers weren't the reason for the stock price increase. Basically all of AMC's theaters were closed, and the company reported only $18.9 million in revenue, a massive $561 million net loss, and $267 million in negative free cash flow.

A young girl watches  a movie in a theater wearing a face mask.

AMC Entertainment isn't out of the woods yet. Image source: Getty Images.

Rather, investors got excited that U.S. theaters were reopening and that highly indebted AMC might be able to stave off bankruptcy. The company had already reopened some theaters in Europe and the Middle East in July, but in August, the company announced it would be reopening over 100 U.S. theaters on Aug. 20, selling tickets for just $0.15, the same price the company charged 100 years ago. Management then touted the "successful first weekend" and reopened another 170 theaters on Aug. 27.

In addition to these initial reopenings, a recent court decision from a New York federal judge cleared the way for studios to be able to own theater chains again, overturning antitrust rules dating back to the 1940s. Theater chains jumped in response, as the prospect of getting bailed out through a sale to a studio emerged as a potential alternative to bankruptcy.

Now what

After AMC's August surge, investors should still steer clear of this consumer discretionary name until there is more clarity surrounding actual moviegoing attendance and AMC's profitability in this strange environment. AMC raised $500 million at a 10.5% interest rate in April and did additional restructuring of its debt in July, pushing out maturities and lowering some cash interest costs. That's impressive, but still amounts to kicking the can down the road.

Even at the end of the month, AMC sold off a few of its theaters in the Baltic region for $77 million, and in September even offered some 30 million shares to the public after August's run-up, diluting shareholders in order to raise extra cash.

These recent share and asset sales don't give me a lot of confidence that AMC's troubles are over just because its theaters are reopening. If anything, it shows a company scrambling to raise cash while it can. The company is still "on the clock" in terms of getting back to any sort of profitability, and if things don't get back to normal in a few quarters, AMC may have to dilute again. In a worst-case scenario, bankruptcy is still on the table.