AMC stock plunges following the debut of APE shares

AMC stock is sinking after the launch of APE shares.

Video Transcript

[AUDIO LOGO]

- My play, AMC plunging today for several reasons. The theater chain's APE units began trading today. They've effectively been a two for one stock split, for lack of a better term, really a tool for the company to potentially raise additional cash in the future. Their CEO Adam Aron reminding investors, though, on Twitter, the value of your AMC investment will be the combination of your AMC shares and your new APE units, if you're buying that.

That's not the only drag on the shares. Rival theater chain Cineworld said Monday it is considering filing for bankruptcy, Cineworld warning that a lack of blockbuster films have dramatically impacted sales. Despite the success of Top Gun and a handful of others, summer traffic still down 30% compared to pre-pandemic levels.

Shares of AMC have been pounded this year. They fell 25% last week. They're down 58% year to date. And today, you can see this plummet, 42% plus, Rochelle. It's tough to really evaluate AMC because of the APEs, because of the meme aspect, and then, of course, the underlying health, or lack thereof, of the movie theater industry.

- It's true. I mean, there's a lot of factors at play, as you were just mentioning. And I know we've had guests saying, look, the theaters are back. People are coming back. They're not, though. A lot of people got comfortable with streaming and being at home and not having to pay the extra expense. If you could just pay the one $20 price and your whole family can see it, that's cheaper than paying for five individual tickets.

So I think maybe AMC was perhaps a little bit too optimistic when they started to see people coming back to the theaters, but we're not the same as we were pre-COVID. We've had to make some changes. And you keep in mind things like budget cuts, with inflation, people are having to make very strategic choices about where they spend. And unfortunately, some of these discretionary places that we spend our money, like the movie theaters, are going to be paying the price for it.

- I think this move is interesting. I don't even know what else to call it because we've been talking about AMC, the fact that their business model, the fundamentals are not strong. We know a lot of the excitement around this name, pretty much all the excitement around this name over the last several months has been generated from that retail trader, that Reddit crowd that has really piled in on this name.

When you take a look, though, at the company, it certainly is struggling when you take a look at the broader picture what's happening. Dave, you mentioned from Cineworld, one of their largest competitors saying that, hey, the landscape for movies, at least in the fall, is not strong and there aren't any of those huge blockbusters coming. So this APE, A-P-E, this new preferred stock will allow them potentially to make acquisitions to pay down debt, which is so critical here for the future health of the company. But I think--

- It devaules the stock, too.

- Yeah,. There are so many questions here, exactly how this all plays out. I think it could be anybody's guess at this point.

- Last movie you saw in a theater?

- A long time ago. I don't even know.

- You don't know. And that to me is always an interesting reminder at the health of that industry.