Please ensure Javascript is enabled for purposes of website accessibility

Why AMC Entertainment Stock Jumped 18% Today

By Howard Smith – Updated Oct 16, 2020 at 12:56PM

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

Today's move is a welcome change from a rough week for shareholders in the theater operator.

What happened

Shares of movie theater operator AMC Entertainment (AMC -1.70%) were up 11% as of noon EDT today, after increasing as much as 18% on the day. The jump is in contrast to the stock's performance earlier this week. Shares are still down almost 20% in the last five days, including today's jump.

So what

It was reported by Bloomberg earlier this week that AMC is considering options to manage its rising debt load, including filing for bankruptcy protection, as theaters either remain closed or at restricted capacity, or lack content as movie releases are delayed. 

empty movie theater with blank white screen

Image source: Getty Images.

The report said that lenders to AMC have met among themselves to discuss another cash infusion to the company to sustain the operation if it does pursue bankruptcy protection. 

AMC said in a Securities and Exchange Commission filing on Tuesday that although about 83% of its U.S. theaters are open, they are restricted to less than 50% capacity. Because of these business conditions, the company said it "anticipates that existing cash resources would be largely depleted by the end of 2020 or early 2021."

Now what

News of increasing coronavirus cases in the U.S. and globally is certainly not helping AMC. So what explains a double-digit increase in the share price today? Frankly, nothing other than a reaction to the sharp decline that's led up to this. 

Shares are down over 40% in the last month, including the accelerated decline this week after the company's SEC filing. The stock is approaching its March 2020 lows. 

With that kind of drop, some investors are willing to bet that one way or another, the business survives, and are trying to jump in before any positive news arrives. 

Howard Smith 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 Stock Quote
AMC Entertainment Holdings
AMC
$7.51 (-1.70%) $0.13

*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
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/28/2022.

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.