AMC Entertainment is down 42.79% over the last 5 days. This is largely due to them announcing that they would be selling up to 40 million new shares to raise money. This is a big deal to shareholders as it dilutes their ownership level of the company. When a company issues more shares to raise money, the amount of shares that an investor holds remains the same. This means that the shareholders now own less of the company than they did before.
Shareholders now have a decision to make. They have to decide if they want to sell their shares or hold their shares and watch their ownership level of the company shrink. Obviously, a lot of shareholders are choosing the first option. This is, however, not the first time that this has happened. AMC has already sold millions of shares in recent years. They have, unfortunately, used up that cash and are now selling more.
It is not uncommon for companies to issue new shares to raise money. It is also not always a bad thing either. Many high growth companies operate at a loss as they are reinvesting all their revenue into the business to keep growing. This can be a good thing as the company can now reinvest that new cash back into the business to grow even faster. The investor’s shares will then become more valuable as they now own a higher revenue producing company.
AMC now trades at a market cap of $1.14 billion at time of writing.
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Finance by CWT 