Should you invest in AMC Entertainment (NYSE:AMC) this year? It’s a tough call, as the company is apparently preparing to increase the number of AMC stock shares in circulation, which could raise dilution concerns.
AMC Entertainment is making progress on the financial front, though, so some risk-tolerant traders might consider a small, speculative share position.
Ironically enough, the saga of AMC Entertainment has played out like a movie over the past few years. The Covid-19 crisis battered the company’s financials, but there’s evidence that AMC Entertainment is improving in that area.
Yet, it’s unknown whether this film will have a happy ending. Before you jump into the trade, consider the implications of AMC Entertainment’s recent shareholder meeting. You might like the results, or you may choose not to invest at all.
AMC Entertainment Has Imperfect but Improving Financials
If you’re looking for a fiscally flawless company to invest in, AMC Entertainment probably won’t fit the bill. However, improvement is the name of the game and AMC Entertainment has some encouraging data points to declare.
CEO Adam Aron evidently intends to keep AMC Entertainment’s “cash reserves robust,” while managing the company’s balance sheet “smartly.”
That’s a tall order, and AMC Entertainment clearly has work to do. In particular, the company’s cash and cash equivalents declined from around $1.59 billion at the end of 2021 to $631.5 million at the end of 2022.
The good news, though, is that AMC Entertainment increased its revenue from $2.53 billion in 2021 to $3.91 billion in 2022.
The company’s adjusted net loss shrank to $727.9 million in 2022 from $1.19 billion in 2021. If AMC Entertainment can continue along this path of improvement, perhaps the company’s progress will eventually be reflected in the share price.
AMC Stock and Dilution Concerns
Thus, there are reasons to have moderately high hopes for AMC Entertainment. However, the results of a recent shareholder meeting might be a deal-breaker for some prospective investors.
AMC Entertainment’s shareholders approved a couple of proposals that may bother some people. First, the company plans to increase the number of AMC shares.
More precisely, a majority of the stockholders approved a proposal allowing AMC Entertainment to convert its AMC Entertainment Preferred Equity Units (NYSE:APE) into AMC stock. Hence, the number of common AMC shares could increase from 524.17 million to 550 million.
Due to share dilution concerns, not all the company’s stockholders might approve of this potential share-count increase. Another eyebrow-raising measure that was approved by AMC Entertainment’s shareholders, is the company’s 1-for-10 reverse split proposal.
Some investors might view this as an artificial way to pump up the AMC share price. It wouldn’t actually increase the value of the shares, nor would it improve AMC Entertainment’s fundamentals.
What You Can Do Now
AMC Entertainment is showing progress in some areas. Not everyone will feel good about the company’s potential reverse stock split and share-count increase.
Financial traders will continue to disagree about whether it makes sense to invest in AMC Entertainment. Perhaps the most sensible approach is to expect volatility and keep one’s position in AMC stock tiny. It’s also fine if you choose not to own any AMC Entertainment shares at all.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.