On Monday, a bunch of stocks that are usually favored by retail traders fell in volatile trading, after AMC Entertainment Holdings’ shares saw its shares tumble.
This was because of the news that Cineworld, the UK-based cinema chain, was contemplating filing for bankruptcy in the United States.
AMC saw its shares tumble by nearly 40% on the day that the US-based movie chain’s preferred shares begin trading in the market.
AMC’s preferred stock
GameStop Corp and Bed Bath & Beyond also declined, as the preferred stock of AMC, which was trading under the ticker ‘APE’, opened on the New York Stock Exchange at $6.21.
The common shares of AMC Entertainment Holdings’ were trading lower by 40% at a value of $10.93. According to the American movie chain, the preferred shares of the company are intended as dividends.
The company disclosed that they would have voting rights similar to the common stock of AMC and can also be used for raising capital down the road.
Volatile trading saw both classes of shares have their trading halted a number of times. APE and AMC shares were together trading at a value of $17.14.
This was significantly lower than the last closing price of AMC at $18.02.
Bed Bath & Beyond
There was a 3% drop in the shares of Bed Bath & Beyond, as it extended its Friday’s slump of 40% after billionaire investor Ryan Cohen took the markets by surprise when he dumped his stake in the struggling retailer.
Last year, Cohen had created a following that comprised of loyal individual investors, all of whom were betting on the turnaround of GameStop Corp. The video game retailer had dropped on Monday by almost 4%.
Market analysts said that a lot of meme stock traders had jumped on the Ryan Cohen bandwagon and with his exit, a number of them were also pressing the same button.
They also said that investors were similar in GameStop, Bed Bath & Beyond, and AMC. Some traders said that AMC stock had tumbled because of stock issues and news of its competitor, Cineworld.
The company owns Regal cinemas in the US and warned that it could file for bankruptcy because its debt had risen during the pandemic.
AMC had reiterated on Friday that the third quarter of this year has a film slate that is ‘relatively weak’. The business of cinema operators had taken a hit due to the COVID-19 lockdowns.
But, 2021 saw AMC raise funds of about $1.8 billion, as it capitalized on the rally that had been seen in meme stocks, thanks to retail investors, which was opposite to what Cineworld had experienced.
There has been a 150% increase in the shares of AMC since the end of 2019, while Cineworld has lost almost 99% of its value during the same time span.
The short-term challenges for AMC remain clear and the market is simply pricing in the drops in AMC that have already been seen.