The easy money flooding stock markets gave meme trading euphoric trades. The days of easy gains from 2021-22 are over. Shareholders failed to stop AMC Entertainment’s (AMC) APE stock conversion. The reality of the dilution and reverse split sent AMC stock to lows not seen since before the meme trade.
GameStop (GME), which failed to pivot from gaming retail stores to digital currency, digital gaming, or a profitable business venture, fell in sympathy. The meme euphoria trades are largely over, especially for AMC and GameStop.
On Aug. 25, 2023, AMC completed its stock conversion of preferred equity units (APE). Combined with the 1-for-10 reverse split, AMC stock lost 65.56% of its value last week. Previously, the courts rejected the conversion, which painfully diluted shareholders. However, the new revised settlement allowed for 995 million APEs to convert to a whopping 100 million AMC shares.
Another APE conversion will add 59 million AMC shares.
Meme traders will learn a hard lesson about reverse splits and dilution. Companies raise money from stock offerings at the cost of shareholders. AMC’s underlying business is not recovering fast enough to stem losses. The debt load will also accelerate AMC’s broken business model.
AMC is a stock to avoid.
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