$AMC Entertainment(AMC)$ A lesson in bagholding Here are the results for a hypothetical AMC investor who invested $1,000 in January 2023 and held until the present, compared to the returns of risk-free cash and the S&P 500 Index: Even despite the pump in 2021, our AMC investor would have seen their initial $1,000 investment turn into just $32.81 at an annualized loss of -47.84%. During this time, cash returned 2.07%, while the S&P 500 returned 16.99%. To put it bluntly, investors that either blindly held cash or invested absentmindedly into an index fund would have beaten the AMC investor. What caused this gross underperformance? Well, a series of inauspicious events occurred: The outbreak of COVID-19 in 2020 decimated AMC’s revenues due to the nature of its business (in-person movie theatres). A 10:1 reverse split in AMC shares followed by ongoing dilution of its shareholders, which was needed to shore up AMC’s balance sheet. AMC fundamentals are not looking great. The company currently has an operating margin of -3.93% and just 884.3 million in cash against $9.14 billion in debt. Ask yourself: would you want to be an owner of this company? Because that’s what buying shares would make you.
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