What happened 

Shares of AMC Entertainment (AMC -5.36%) fell as much as 40.3% in early trading on Monday morning after completing a stock dividend. Management issued AMC Preferred Equity (NYSE: APE) to shareholders on a 1-to-1 basis over the weekend, resulting in effectively a 2-for-1 stock split.

So what 

AMC completed what's called a stock dividend, meaning that instead of a dividend paid in cash, investors got a dividend paid in stock. In this case, the stock was AMC Preferred Equity, which has the same voting rights and economic interest as a traditional share of AMC.

Investors who owned a share of AMC on Aug. 19, 2022, after the market closed got a share of AMC Preferred Equity today. The price of those two combined will be similar to the price of AMC at the market's close on Friday. 

This is a convoluted move by AMC, but the reason is the company agreed not to issue additional shares of AMC stock as part of previous fundraising. But it can issue more shares of APE preferred stock to raise money. 

Now what 

The AMC move makes sense on its own, but the overall industry looks shaky. The world learned this morning that No. 2 theater operator Cineworld is considering filing for bankruptcy protection. That's not a great sign for the future of the business and should raise red flags about the future of needing to raise funds. I don't like AMC's business right now, and given the likely dilution coming from APE shares, this is a stock I'm staying far away from.