AMC Entertainment (NYSE:AMC) stock had its price target cut to $1.55 by Citigroup analyst Jason Bazinet. The analyst also kept his “sell” rating for AMC stock.
This was just one day after a new class action suit was filed against its coming conversion of AMC Preferred Equity Unit (NYSE:APE) shares to AMC common stock.
AMC still plans to make the conversion next week. AMC stock rose 4% on Aug. 17 and rose slightly by about 0.75% overnight. The stock opened this morning at $4.07 per share.
Going Around Again
A Delaware Chancery Court approved AMC’s settlement with common stockholders on Aug. 11. APE shareholders launched their suit against the conversion on Aug. 14.
The new suit is aimed directly at the settlement. AMC shareholders got extra shares worth $129 million after claiming a shareholder vote approving the conversion was rigged against them. Now the APEs want their own $129 million in stock because their stake is being diluted.
The new suit will be heard in the Delaware Supreme Court after the Chancery Court rejected efforts to stop the conversion. The deadline for responses is Aug. 18.
Meanwhile, the business remains troubled. Barbie is a blockbuster, and Oppenheimer blew up. But a strike by writers and actors means there’s little product behind it. Consumers moved AMC to scrap its “Sightline” program, which would have collected more money for choice seats.
CEO Adam Aron encouraged small investors to buy AMC as a “meme” stock. He then launched the APE shares to capitalize. But he now sees “serious liquidity issues” for the company. Aron admitted shareholders may be underestimating the company’s cash burn as winter sets in.
AMC remains one of the most popular shorts in the market. On Stocktwits, traders seemed confident that small investors will beat them back. About 26% of shares were recently held short, according to Fintel. But 61% of positions off the exchanges are shorts.
AMC Stock: What Happens Next?
I pity the fool who takes a short position in AMC. I also pity the fool who owns it or buys it. The market is ignoring AMC’s lack of fundamental value. There are real companies with real earnings available, with prices expected to decline further in the near term. But if you still want to play, have fun.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
