Wrapup 1: Meme stocks fall with AMC, Bed Bath in red

Vinco Ventures

22/08/2022 19:36

By Anisha Sircar, Medha Singh and John McCrank
    Aug 22 (Reuters) - A clutch of stocks favored by retail
traders tumbled on Monday in volatile trading as news that
UK-based Cineworld  CINE.L  warned of a possible bankruptcy sent
AMC Entertainment Holdings' shares  AMC.N  diving almost 40% on
the day that the U.S. movie chain's preferred shares started
trading.
    Bed Bath & Beyond Inc  BBBY.O  and GameStop Corp  GME.N 
also slid as AMC's preferred stock, trading under the ticker
"APE", opened at $6.21 on the New York Stock Exchange. AMC
common shares were nearly 40% lower at $10.93. 
    The American movie chain said its preferred shares, intended
as dividend, will have the same voting rights as AMC common
stock and could be used for raising capital in the future.
    Trading of both classes of shares was halted multiple times
in volatile trading. AMC and APE shares were together trading at
$17.14, which was below than AMC's last closing price of $18.02,
according to Reuters calculations.
    Bed Bath & Beyond Inc  BBBY.O , was down 3%, continuing
Friday's 40.5% slump after billionaire Ryan Cohen abruptly
dumped his stake in the struggling retailer.  urn:newsml:reuters.com:*:nL4N2ZV1WQ
    Cohen had built a following last year of loyal individual
investors who bet on his turnaround of video game retailer
GameStop Corp  GME.N . GameStop was down 4% on Monday.  
    “A lot of the meme-ers were on the Ryan Cohen bandwagon and
now that he’s gone I think a lot of them are hitting the exit
button,” said Dennis Dick, head trader and market structure
analyst at Triple D Trading. "So you had similar investors in
Bed Bath and Beyond and Gamestop and AMC.”
    Traders said AMC shares tanked due to the stock issue and
after Cineworld, which owns Regal cinemas in the United States,
warned that it was staring at a possible bankruptcy filing due
to debt that soared during the pandemic.  urn:newsml:reuters.com:*:nL4N2ZY1A4
    On Friday, AMC reiterated that it was hit by a "relatively
weak" film slate in the third quarter of 2022. urn:newsml:reuters.com:*:nL4N2ZU39O
    "The AMC distribution of “APE” is somewhere between a stock
split and a stock dividend," Rick Meckler at Cherry Lane
Investments. "To understand the price movement in AMC today, you
need to add the current price of AMC stock with the price of
APE. This seems designed to effectively allow for the issuance
of more equity by AMC without technically breaking the company’s
promise to not issue more common shares further potentially
diluting their value."
    Thomas Hayes, chairman of Green Hill Capital said the
security was AMC "pretending to give existing shareholders
something of value, but in reality they are just paving the road
for future dilution."
    The COVID-19 lockdowns severely impacted the business of
cinema operators. However, AMC managed to raise $1.8 billion in
2021, capitalizing on the rally triggered by retail investors'
interest in meme stocks, in a sharp contrast to Cineworld's
fate.  urn:newsml:reuters.com:*:nL4N2ZV2HZ
    AMC shares have jumped over 150% since the end of 2019,
whereas Cineworld lost about 99% of its share value in the same
period.
    "AMC's short term challenges remains clear with today
announcement, and the market is pricing those in the huge AMC
price drop we see," said Guido Petrelli, CEO of Merlin Investor.

 (Reporting by Medha Singh, Anisha Sircar, Bansari Mayur Kamdar
and Nivedita Balu in Bengaluru and John McCrank in New York;
Editing by Shinjini Ganguli, Megan Davies and David Gregorio)
 ((Medha.Singh@thomsonreuters.com; +91 80 6210 0592; Twitter: https://twitter.com/medhasinghs;))