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AMC Entertainment: A 'Dead Company Walking,' Says Bear Cave Report

Published 16/05/2024, 16:25
© Reuters. AMC Entertainment: A 'Dead Company Walking,' Says Bear Cave Report
AMC
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Benzinga - by Michael Cohen, Benzinga Editor.

In a report from “The Bear Cave” published on Thursday, Edwin Dorsey scrutinizes AMC Entertainment (NYSE:AMC), the world’s largest movie theater chain, highlighting significant concerns about the company’s financial health and recent stock movements.

Despite a recent doubling of AMC’s stock price, Dorsey said the company remains “consistently unprofitable, deeply indebted, and highly dilutive.” He starkly describes AMC as “a dead company walking.”

Benzinga has reached out to AMC for comment on the report.

The Influence Of Social Media On AMC The report emphasizes the role of social media influencers in the recent stock surge. On May 8, Edward Constantin, known as @MrZackMorris, tweeted “AMC” with a meme. Constantin has a controversial history, having been charged in 2022 in what the SEC called "a $100 Million Stock Manipulation Scheme," Dorsey said.

The scenario shifted on May 12, when Keith Gill, also known as @TheRoaringKitty, tweeted a meme after three years of inactivity. Gill, famous for his deep-value investment style and significant role in the GameStop saga, sparked massive speculation. His tweet was viewed over 26 million times. Dorsey said: "None of Roaring Kitty's posts this week or in past years have ever mentioned or alluded to AMC."

Also Read: Jim Cramer Can’t See GameStop Trading At $64 Or Even $44, Warns Against Meme Stock Mania: ‘Responsible Move Is To Sell, Sell, Sell’

AMC’s Questionable Position Dorsey outlines several reasons why AMC is unlikely to see sustained gains:

  • Lack of Deep Value: "AMC does not fit the ‘deep value' profile of Roaring Kitty," Dorsey said. Gill’s investment style typically focuses on companies with high insider ownership, reasonable GAAP metrics and a deep discount to fair value, none of which apply to AMC.
  • Lower Short Interest: Dorsey said "AMC and other meme stocks have much lower short interest now than in January 2021," reducing the likelihood of a significant short squeeze.
  • Promoter Credibility Issues: The Bear Cave report questions the integrity of AMC’s most prominent promoter, Constantin, who Dorsey said has previously made offensive and controversial statements online.
  • Dilution of Shares: AMC has significantly diluted its stock, with shares outstanding increasing from 12 million in January 2020 to over 250 million today. The company recently disclosed it had exhausted its at-the-market equity offering and announced new stock issuance agreements.
  • Antagonizing Investors: AMC has alienated many of its legacy retail investors, Dorsey said. One of AMC's biggest past supporters, @TaraBull808, no longer mentions the company and has expressed anger toward CEO Adam Aron.
    • Dorsey adds that while the speculative surge in AMC's stock has drawn attention, the company’s long-term viability remains dubious.

    "AMC stock is down ~90% over the last five years and down ~50% since January 1, 2021," he said. By comparison, GameStop has seen substantial gains over the same periods.

    This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

    Now Read: GameStop, AMC Surge Burns Short Sellers: This Hedge Fund May Have Been On The Right Side Of The Trade

    Photo: Shutterstock.

    © 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

    Read the original article on Benzinga

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