- AMC shares continue to advance on Monday, reaching above $50.
- AMC and other retail stocks remain in the crosshairs of the SEC as it monitors volatility in certain stocks.
- AMC asks shareholders to approve the sale of another 25 million share issue in 2022.
Update June 9: AMC Entertainment Holdings Inc (NYSE: AMC) has kicked off Wednesday’s trading session with drip below the round $50 level, yet buyers are coming in and are keeping the battle with that area in play. Moreover, the equity of the movie-theater firm is holding above $47.91, which was June’s low closing point – critical support. As described below, regulatory issues are on investors’ minds.
AMC shares continue to be well supported by their retail brethren as the stocks continue to push higher despite more talk of share sales. AMC is looking to get shareholders to approve the issuance of 25 million shares in 2022. Last week two share sales ignited the stock to swing high, an unusual phenomenon in financial markets, which normally sell-off when dilutive policies are announced. Share sales or share issues are generally dilutive in nature and so not liked by existing shareholders.
However, the AMC case has not really followed the normal rules of trading and here proved no different. The first share sale involving Mudrick Capital appeared to be the catalyst for retail traders to prove the short sellers wrong. The second sale last week added further fuel to the fire as retail traders pushed AMC to sky-high levels in a bid to squeeze shorts.
AMC then further added to the recent sales by filing to issue 25 million new shares in 2022. AMC’s share count is up over 300% since the start of 2020 as the company continually raises cash to fend off the challenges of the pandemic. AMC had filed to issue 500 million new shares, but this plan was dropped in April as shareholders appeared not to be in favour of it. This new plan to issue 25 million new shares was discussed on the Youtube channel Trades Trey, favoured by many of the new retail R/WallStreetBets traders.
The CEO is having to draw a fine line between asking for shareholder support – saying “If you arm us with the tool — meaning stock as the tool — to go find value-creating opportunities for AMC shareholders, we can do that. If we are not armed with this tool, then you’re tying our hands behind our back and you’ll make it just that much harder for us to land some of these attractive opportunities that could benefit us all.” He also cautioned against the moves in AMC’s share price.
The SEC filing contained some strong warnings about the volatility of the share price: “Within the last seven business days, the market price of our Class A common stock has fluctuated from an intra-day low of $12.18 on May 24, 2021 to an intra-day high of $72.62 on June 2, 2021, and we have made no disclosure regarding a change to our underlying business during that period, other than with respect to an additional financing. Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.” A strong statement indeed.
AMC stock forecast
Support at $36.13 was in sight of bears on Thursday, but retail bulls have returned to take control. $36.13 is the high from March 2015, and this level worked well as can be seen from the clean breakthrough on Wednesday. Below that is the 61.8 Fibonacci retracement, perhaps the most-watched of the Fibo levels, at $33.39, this also corresponds with Tuesday’s high and the 9-day moving average. The momentum indicators have at least moved back toward neutral territory as the speed of the move has slowed, if not the volatility. Only the Relative Strength Index (RSI) remains in overbought territory, while the Commodity Channel Index (CCI) and the Willaims %R are now below overbought levels.
