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CEO Adam Aron Sells AMC Stock. Should Shareholders Care?

AMC's CEO has sold more than $40 million of stock since November. Although insider selling is sometimes a negative, here's why AMC shareholders shouldn't worry.

AMC Entertainment  (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report stock hasn't performed very well thus far in 2022. At last check, it's fallen more than 20% since the first trading session of the year — despite plenty of positive sentiment among its shareholders on the Reddit forums.

It's possible one of the factors that could be negatively affecting the stock is CEO Adam Aron's recent sales of more than $40 million worth of his AMC shares. He had first announced his plan to sell in August of last year.

Typically, it's a negative sign when an insider sells such a huge chunk of stock. But here's why investors shouldn't worry about Aron's stock sales.

Figure 1: Adam Aron, CEO of AMC.

Figure 1: Adam Aron, CEO of AMC.

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Adam Aron's Selling Spree

On January 12, in an act of transparency, AMC CEO Adam Aron tweeted that he had completed his plan to sell some of his shares:

However, make note of the last two sentences in that tweet: "I STILL OWN OR PLAN TO VEST IN 2,302,760 AMC SHARES. I am in!" This indicates Aron still believes in the potential of his shareholders to keep AMC stock at elevated levels.

According to SEC data, Adam Aron sold 312,500 shares at a price of $22.84, which totaled $7.14 million. Previously, the CEO had already sold $9.65 million worth of shares in a single sale and, even earlier, approximately $25 million worth of shares.

In all, the CEO has sold off approximately $41.7 million worth of shares in recent months.

In addition, late last year, AMC CFO Sean Goodman sold all of his 18,316 shares for around $565,000.

It's difficult to determine whether or not these insider sales have had any impact on AMC's share price during recent trading activity. Approximately 2 million AMC shares change hands daily. So Aron's latest transaction represents less than 1% of AMC's average daily volume.

Plus, when he sold shares a few weeks ago, the CEO made it clear that he had lost no confidence in AMC. Instead, he noted it was part of his plan to unwind his stock positions as he nears retirement age.

Back then, Aron wrote, "I don't want any of you ever to think that I have anything but full confidence in AMC's future."

AMC's Ownership Structure

It's worth remembering that AMC's biggest stock movers tend to be its individual investors, instead of institutional and insider investors.

In fact, according to Yahoo Finance, individual investors currently own nearly 75% of the AMC shares on the market. By comparison, institutional investors own 25% and insiders own 0.3%.

Figure 2: AMC ownership.

Figure 2: AMC ownership.

Still, even the main institutional investors — Vanguard and BlackRock are the top holders with 9% and 7%, respectively — typically put their holdings into ETFs that often end up in the hands of individual investors as well.

The Bottom Line

Although insider trading activity tends to have a psychological effect on many individual and institutional investors, it's unlikely that recent CEO share sales will really have a major impact on AMC stock.

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Twitter Speaks

AMC shareholders and enthusiasts, do you believe that the recent insider sellings have hurt the recent performance of AMC stock?

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)