Please ensure Javascript is enabled for purposes of website accessibility

AMC to Sell up to 11.5 Million Shares, Issues Warning to Investors

By Howard Smith - Jun 3, 2021 at 8:42AM

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

The company has now embraced its status as a meme stock, and is trying to capitalize on it.

AMC Entertainment Holdings (AMC 2.46%) continues to exploit its meme stock designation by raising capital as its shares have risen exponentially on the backs of retail traders and others driving short-sellers out. Today, the company filed to sell up to another 11.55 million shares after the stock almost doubled yesterday alone, and is up 280% in just the last week. 

Today's announcement came with a warning for investors looking to buy shares, and promptly eliminated a 20% pre-market gain in the stock. AMC has embraced the frenzy, raising $230.5 million in a share sale earlier this week, and launching AMC Investor Connect yesterday, aiming to utilize the euphoria in the stock to help the business.

A man sits in front of computer. He is leaning back, with both of his hands covering his eyes.

Image source: Getty Images.

AMC said it now plans to sell up to 11.55 million shares "from time to time" at market prices. The company also acknowledged the disconnect of the stock movement from the underlying business, noting that shares have "recently experienced, and may continue to experience, extreme volatility, which could cause purchasers of our Class A common stock to incur substantial losses." 

AMC has accumulated debt and diluted shares as it has navigated through theater closings and movie release delays through the pandemic. Now that the business itself is recovering, the company is taking advantage of the retail trading mania to help reduce debt and improve flexibility with additional capital. In its earlier equity raise announcement this week, the company said proceeds would be used primarily "for the pursuit of value creating acquisitions of additional theatre leases."

Today's filing specified use of the funds "may include the repayment, refinancing, redemption or repurchase of existing indebtedness, acquisition of theatre assets, working capital or capital expenditures and other investments."

Investors should heed the company's warning of volatility and a potentially large reversal in the recent moves. But for the long term, the company is doing what it can to take advantage of the situation to right the business. 

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, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
$24.80 (2.46%) $0.59

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

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.