AMC shares plunge as rival theater warns of possible bankruptcy

AMC Entertainment shares are plunging after rival movie theater chain Cineworld warned that it might file for Chapter 11 bankruptcy.

AMC, the world's largest movie theater chain, joined the ranks of so-called meme stocks last year as retail investors bet on a turnaround and drove its stock up more than 1,000%. Its shares fell more than 38% Monday to $11.05 after officials at U.K.-based Cineworld said in a statement Monday that it is trying to restructure its debt, which could include declaring bankruptcy.

"The strategic options through which Cineworld may achieve its restructuring objectives include a possible voluntary Chapter 11 filing in the United States and associated ancillary proceedings in other jurisdictions as part of an orderly implementation process," the company said.

Movie theaters have taken a major financial hit during the coronavirus pandemic as customers shunned group settings. Adding to their challenges, some film studios are foregoing theatrical releases altogether and instead have premiered highly anticipated movies on streaming services.

AMC and Cineworld hoped movie-goers would return to theaters en masse once a majority of the pandemic restrictions were lifted, but patrons haven't filled seats in the volumes companies wanted. A May survey from Morning Consult found that many Americans continue to avoid theaters because of ongoing COVID-19 concerns as well as high movie ticket prices.

In March, Cineworld reported a $656 million loss and $4.8 million in debt for 2021. AMC earlier this month reported $121 million in losses for its second quarter this year, along with $1.1 billion in revenue.

Responding to Cineworld's talk of bankruptcy, AMC's CEO Adam Aron said in a statement last week that AMC isn't going down that same path. The slate of films scheduled for this fall is "relatively weak," but it should pick up at the end of 2022 and into 2023, Aron said.

"AMC ended the second quarter of 2022 with more than $1 billion of liquidity, thanks to significant amounts of cash raised in calendar years 2020 and 2021," he said. "We remain confident about AMC's future."

AMC operates 11,100 screens in nearly 1,000 locations in the U.S., Europe and the Middle East.

Cineworld, which owns Regal Cinemas, is the world's second-largest theater operator with 9,189 screens across 751 locations.

Also weighing on Cineworld's books — a $1 billion legal settlement levied late last year after a botched merger with Canadian movie theater chain Cineplex. Cineworld has appealed the settlement in court but a judge's decision is still pending.

AMC isn't the only meme stock to slump recently. Bed Bath & Beyond shares cratered last week after a large stakeholder, billionaire Ryan Cohen, sold his entire stake and made a $178 million in profit.