AMC Entertainment (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report shares are trading higher on Monday even after MKM Partners analysts cut their rating on the largest U.S. theater chain to sell.
The investment firm also halved its 12-month price target on AMC to $1 even as the question of AMC's liquidity for 2021 has been resolved. "[Achieving] solvency came at a steep price," the investment firm wrote in a note.
The Leawood, Kan., company's shares have figured prominently in the conflict between short sellers -- bettors that the stock price will drop -- and a cohort of retail investors participating on the subreddit WallStreetBets.
At last check AMC shares were 6.5% higher at $14.12.
MKM Partners analysts had been neutral on the company since last May.
Last week, it was reported that AMC was considering issuing more stock as a way to bolster its cash position. The company has struggled to keep its 1,000-plus global movie theaters operating while the pandemic keeps the vast majority of moviegoers away.
The David-and-Goliath battle between retail participants on WallStreetBets and major institutional investors has so far pushed shares of GameStop (GME) - Get GameStop Corp. Class A Report, BlackBerry (BB) - Get BlackBerry Limited Report, Express (EXPR) - Get Express, Inc. Report, Bed Bath & Beyond (BBBY) - Get Bed Bath & Beyond Inc. Report, Naked Brands (NAKD) - Get Naked Brand Group Limited Report and others higher.
The Redditors have said they are bidding to force hedge funds and other large institutional investors to abandon their short positions in those companies.
But MKM Partners analyst Eric Handler says that as these individual investors pump up the stock price, they are missing fundamental issues with the company.
Shareholders in AMC "have been diluted by roughly 75% over the last couple months and there is still approximately $5.7 billion of debt, a total which is growing each quarter due to deferred interest payments which are tacked on to the principal balance," Handler wrote.
"There is also the overhang of $450 million of deferred rents, which will some day need to be addressed."