AMC Entertainment Shares Drop 10% on Plan to Sell New Stock

The theater chain reported stronger-than-expected Q3 results but investors sent shares down on the new issue

AMC Theaters cinemas movie
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Shares of AMC Entertainment fell more than 10% Thursday after the theater chain operator filed plans to sell more $350 million in new stock.

The stock was down $1.08, or 10.7%, to $9.01 in midday trading, after earlier trading as low as $8.02. Trading volume was more than twice a typical day. The stock closed Wednesday down 74% since the start of the year.

AMC reported a strong third quarter after the market closed Wednesday, as the box office hits “Oppenheimer” and “Barbie” helped send revenue soaring 45% compared to last summer. The profit of 8 cents per share soundly topped Wall Street’s expectations for a loss of 22 cents.

Attendance reached 73.5 million in Q3, the highest quarterly attendance for the chain since the COVID-19 pandemic.

But while the results were positive, the company also said it plans to sell more stock, which could serve to dilute the value of the shares already in circulation.

AMC said in a regulatory filing Thursday morning that it is working with Citigroup, Barclays Capital, Goldman Sachs and B. Riley Securities to sell $350 million in new shares in at-the-market offerings, or block trades to the investment banks.

The theater chain, which scored big at the beginning of the current quarter with the release of Taylor Swift’s concert film, “The Eras Tour,” warned investors that its stock is volatile.

“The extreme fluctuations in the market price and trading volume of our Class A common stock in recent years have been accompanied by reports of strong and atypical retail investor interest, including on social media and online forums.,” the company said in the prospectus filed with the announcement of the sale.

“While the market prices of our Class A common stock may respond to developments regarding our liquidity, operating performance and prospects and developments regarding our industry, we believe that volatility and our current market prices also reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last,” the prospectus said.

The statement was referring to the history of theater chain’s stock as the focus of “meme stock” craze that exploded during the pandemic in 2020, in which investors involved in social media made bets on certain stocks in ailing industries. AMC rode the gains from the resulting run-up to raise nearly $600 million by selling new stock called preferred equity units that were dubbed “APEs.”

Those preferred shares were converted to common stock in August after a shareholder approval of a plan that included a reverse stock split, plus the resolution of several related lawsuits. The conversion generated another $325 million, CEO Adam Aron said.

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