Please ensure Javascript is enabled for purposes of website accessibility

Why AMC Entertainment Stock Fell 22% at the Open Today

By Reuben Gregg Brewer – Updated Oct 14, 2020 at 10:11AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Another day, another big price decline, as investors are getting more and more negative on the movie theater chain.

What happened

Shares of movie theater operator AMC Entertainment (AMC -14.52%) fell 22% in early trading on Wednesday. That follows a swift decline the day before. Both drops are tied to the same investor concerns.

So what

On Wednesday, AMC filed a report with the Securities and Exchange Commission that updated its operating and financial conditions. The news wasn't particularly good, and the stock fell sharply. Basically, the company still hasn't been able to open all of its theaters, and revenue is down by 85% year over year. Worse, moviemakers are delaying key releases or canceling them altogether, suggesting that there's little opportunity for improvement in the near term.   

A man looking at a line crashing through the floor beneath him.

Image source: Getty Images.

Which brings up the really bad information contained in the SEC filing: If conditions don't improve, AMC said, it might actually run out of cash by the end of 2020 or in early 2021. The company noted that it was looking to raise cash, which it could do in a number of ways, including stock sales and bond issuances. But Wall Street read the update as a bankruptcy warning, which is not an unreasonable take on the issue.

That said, AMC has pushed back, telling media outlets that it is hard at work to raise the cash it needs and is not currently examining bankruptcy. Only, judging by the early stock performance today, it appears that these assertions are falling on deaf ears, with Wall Street more focused on the risks than the chance of a turnaround.   

Now what

AMC stock is not an appropriate option for risk-conscious long-term investors. Two days worth of discussion about the poor operating environment, a looming cash crunch, and questions on whether or not the movie chain operator is looking to file for bankruptcy are all clear signs of the risks here. 

Reuben Gregg Brewer 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
AMC
$6.83 (-14.52%) $-1.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.