What happened

Shares of movie theater operator AMC Entertainment (NYSE:AMC) 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.