Share Dilution

Why AMC Entertainment shares lost 32% in July

What happened

Actions of AMC Entertainment (NYSE: AMC) retreated last month as top-flight cinema stock got a dose of reality when Disney (NYSE: DIS) successfully launched “Black Widow” in theaters and on Disney + simultaneously. The news added credence to the argument that movie theaters are being disrupted by streaming services, especially after the increase in streaming during the pandemic.

Based on data from S&P Global Market Intelligence, the stock ended the month down 32%. As you can see from the chart below, the stock’s decline occurred in the first half of the month.

AMC given by YCharts

So what

AMC stock fell 28% in a three-day period after Disney released results for “Black Widow” on opening weekend. The entertainment giant said “Black Widow” grossed $ 215 million at the box office and through Disney + Premier Access, which allows subscribers to stream new movies for $ 30 in addition to the price of the subscription. Disney said “Black Widow” grossed over $ 60 million for Premier Access, which is more valuable than box office revenue since Disney does not share that revenue with theaters. Typically, theaters and studios split box office revenue 50/50.

The entrance to an AMC multiplex.

Image source: AMC Entertainment.

A decision by AMC shareholders to reject the company’s plan to sell an additional 25 million shares also appeared to lower the stock, as it signaled that investors were fed up with the near constant dilution of shares over the course of the year. last year. It may have also signaled that the stock rally even in AMC was coming to an end.

Now what

AMC shares hit stratospheric levels in June after CEO Adam Aron announced a special investor rewards program, linked to the Stubs customer rewards program, in a bid to fuel excitement among retailers for actions.

However, it is clear that the title has been overvalued for months and AMC could finally start to come back to earth. The stock continued to fall in August as memes investors can move on to the next big thing, but AMC might still have a long way to go from here.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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