AMC stock drops 15% – here’s why the meme stock might keep falling

Posted: 14 December 2021 6:02 pm
News
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Insider selling and a rougher market may have investors looking elsewhere.

Shares of AMC Entertainment have risen 5.2% following a 15% drop during yesterday's trading, with the meme stock now down 42.6% over the last month alone.

The stock has been volatile since news of the latest COVID-19 variant Omicron emerged last month.

Reopening uncertainties and recent insider sales may also be driving the stock downward.

How we got here

AMC was one of the big Reddit-driven meme stocks a year ago and it’s been way up ever since, if not at the highs.

The stock suffered during the onset of the pandemic as theatres shut down.

Shares were trading for a couple of dollars in March 2020 and were beaten down through the summer as moviegoers stayed home.

By October 2020, the company was warning investors that bankruptcy was closing in.

While AMC raised almost US$1 billion to stave off bankruptcy, the stock’s meteoric rise came a month later on the tailwind of the Gamestock frenzy, as traders in the r/wallstreetbets community zeroed in on other potential investment opportunities.

Shares of AMC hit a high of US$72.62 in June 2021.

AMC stock remained volatile for the next few months but has been slipping as of late.

The stock is down around 68% from its 52-week high.

Why the big single day drop?

Shares seemed to be down today on no news except recent insider sales.

On 7 December, AMC CEO Adam Aron sold $9.65 million in shares.

Aron mentioned on November’s earnings call that he would be selling AMC stock as a part of his estate planning.

He continues to hold around 96,000 shares.

In a separate transaction, AMC CFO Sean Goodman sold all of his 18,316 shares for just over $565,000.

With the market struggling, investors may just be moving away from riskier stocks. Meme stocks Gamestop, Bed Bath & Beyond and Blackberry are also down.

Gamestop is down 32% from a month ago. Bed Bath & Beyond is down around 26% and Blackberry 18%.

Buy the dip?

While the dip might’ve allowed short-sellers to gain more than $1 billion on their bearish bets against AMC, r/wallstreetbets remains bullish on the stock.

According to data by analytics firm Ortex, short-sellers have now gained back half their losses from the initial short-squeeze on AMC.

However, r/wallstreetbets traders aren’t selling out of their long position either.

“This is the dip before the rip, Jan/Feb will be a repeat run to deep space,” one member said.

While another replied “I agree 100%. The anniversary will be one hell of a day!!”

At the time of publication, Matt Miczulski owned shares of AMC.

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