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Why AMC Entertainment Is Falling Today

By Rich Duprey - Jun 24, 2021 at 12:40PM

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Not every day can see massive gains for the theater operator.

What happened

Shares of AMC Entertainment (AMC -13.91%) were falling 4% in midday trading Thursday after the theater operator published a proxy statement reminding investors it wants to further dilute shareholders.

So what

AMC has used the support it's received from the r/WallStreetBets crowd to massively dilute its shareholders by issuing tens of millions of new shares to raise money. While the stock had been on life support due to the pandemic causing states to order its theaters closed for most of last year, the tremendous run-up in its stock's value -- up 2,650% so far in 2021 -- has allowed it to raise billions of dollars.

Money in movie clapper board

Image source: Getty Images.

CEO Adam Aron tweeted that the dilution has served to strengthen its finances:

Now what

Aron also tweeted he and the board of directors are looking for shareholder support to issue an additional 25 million shares. And perhaps to minimize the impact the dilution would cause, he also noted the shares can't be issued till next January, some six months from now.

The plan, though, doesn't seem to be sitting well with many investors, which could be why Aron saw the need to ask for support via social media.

Rich Duprey 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.

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Stocks Mentioned

AMC Entertainment Holdings, Inc. Stock Quote
AMC Entertainment Holdings, Inc.
$21.36 (-13.91%) $-3.45

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