AMC or APE: Hold both or Sell?

The issuance of $AMC Entertainment Preferred(APE)$ units is in its essence a fund raising by $AMC Entertainment(AMC)$. Issuing more common shares was not popular with AMC’s common shareholders who had voted against the move. Hence, the moves theater chain found a workaround without shareholders’ approval and capitalising on the hype from its meme supporters by issuing the preferred equity units.

It appears that AMC’s cash flows from operations are unable to sustain its operating activities, and that it has to seek external financing. This does not instil confidence in me on the company's prospects.

Hence, I did not buy AMC shares to receive APE units, and neither would I buy either now.

With the prevalence of the streaming services, I can’t recall the last time I visited a cinema. The likes of $Netflix(NFLX)$, $Amazon.com(AMZN)$and $Walt Disney(DIS)$have been giving AMC a hard run for its money. COVID-19 may have passed its peak, but the pandemic has irreversibly altered the movie watching landscape, with some past cinema-goers permanently switching to streaming services.

AMC will have to innovate and reinvent itself to stay relevant post-pandemic, not only in the face of stiff competition from other movie theater chains, but more importantly in the retention of customers from further losses to streaming platforms.

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