AMC shares fall sharply as rival Cineworld warns of possible bankruptcy

Shares of AMC Entertainment are falling, following rival theater chain Cineworld warned that he can file for Chapter 11 bankruptcy.

AMC, the world’s largest movie theater chain, has joined the ranks so-called meme stocks last year as retail investors bet on the turnaround and drove its stock up more than 1,000%. Its shares fell more than 38% to $11.05 on Monday after UK-based Cineworld said on Monday it was trying to restructure its debt, which could include filing for bankruptcy.

“Strategic options by which Cineworld can achieve its restructuring objectives include a possible voluntary Chapter 11 filing in the United States and related ancillary proceedings in other jurisdictions as part of an orderly implementation process,” the company said.

Cinemas have suffered a serious financial blow the coronavirus pandemic as clients avoided group settings. Adding to the problems, some movie studios are abandoning theatrical releases and instead showing highly anticipated movies on streaming services.

AMC and Cineworld had hoped that moviegoers would return to theaters in droves after most of the pandemic-related restrictions were lifted, but visitors did not fill seats in the volumes that the companies wanted. May survey from Morning Consult found that many Americans continue to avoid theaters due to ongoing issues with COVID-19 as well as high movie ticket prices.

Cineworld in March reported $656 million in losses and $4.8 million in debt for 2021. AMC earlier this month reported A loss of $121 million for the second quarter of this year and $1.1 billion in revenue.

In response to Cineworld’s bankruptcy talk, AMC CEO Adam Aron said in statement last week that AMC is not following the same path. The lineup of films slated for this fall is “relatively weak,” but should pick up in late 2022 and into 2023, Aron said.

“AMC ended the second quarter of 2022 with more than $1 billion in liquidity thanks to significant cash raised in calendar years 2020 and 2021,” he said. “We remain confident in the future of AMC.”

AMC operates 11,100 screens in nearly 1,000 locations in the US, Europe and the Middle East.

Cineworld, owned by Regal Cinemas, is the second largest cinema operator in the world with 9,189 screens in 751 locations.

It also weighed on Cineworld’s books, with a $1 billion settlement levied late last year after a botched merger with Canadian cinema chain Cineplex. Cineworld appealed the settlement in court, but a judge’s decision is still pending.

AMC isn’t the only meme stock to fall of late. Bed Bath & Beyond shares are cratered last week after a major shareholder, billionaire Ryan Cohen, sold his entire stake for a $178 million profit.