Will AMC Shareholders Give The Go Ahead For A Reverse Stock Split To Save The Stock? Are Meme Stocks A Buy?| Investor’s Business Daily

Meme stock AMC (AMC)  may do a reverse split.  AMC announced a 10 for 1 reverse split on Dec. 12. It also said it would reduce its debt by $100 million by selling AMC Preferred Equity (APE) units to Antara Capital. Will the double action of reducing debt and the number of outstanding shares save AMC stock? Shares rose steeply during the pandemic but have fallen near all time lows.




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AMC issued (APE) units in August 2022. Shareholders got one stock of APE for every share of AMC.

Antara current holds AMC debt but will reduce that by $100 million by exchanging some of it for 91 million APE shares.

The movie stock also announced a reverse 10-for-1 stock split and funding through Antara Capital. AMC will sell $110 million APE to Antara at 66 cents per unit. Antara will also exchange AMC notes of $100 million for 91 million APE units.


A reverse split is the opposite of a split. It reduces the number of outstanding shares and brings up the value of each share. It is a strategy to prevent getting delisted from an exchange.

AMC may have done the right things to improve liquidity and protect itself from the perfect storm of mounting interest rates and crashing stock values. But it remains to be seem if shareholders approve the reverse split.

 

Meme Investors Takes Stake In Alibaba

Ryan Cohen is known for his investments in meme stocks. In 2020, his stake in GameStop (GME) profited when a short squeeze in 2021 drove the stock up to its all time high of 120.




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In August 2022, the contrarian investor picked up Bed, Bath & Beyond (BBBY) for $15 and change only to sell the stock and options for $178 million according to reports. BBBY rose to trade at $30 and crashed to $6 in September.

His recent stake in Alibaba (BABA) last week however seems to have a different aim. Cohen is reportedly pushing for more buybacks for the Chinese ecommerce giant. Alibaba increased its buyback from $40 billion earlier. Cohen sees a double-digit sales growth and 20% free cash flow growth for the company, according to reports and is pushing for higher buybacks.

Buybacks increase the value of the outstanding shares of a company.

Alibaba is not a meme stock. The investor started buying BABA stock in 2022 through the holding company RC Ventures. Cohen has indicated that he prefers companies whose valuations are lower than their business fundamentals.

 

BBBY’s Bankruptcy Looms

Meme stock Bed Bath and Beyond got warned on Thursday that it risks a delisting. However the reason is not the company’s near-bankruptcy. BBBY did not file its quarterly earnings for the period ended Nov. 26, 2022 on time, as required by the Nasdaq where it trades.

The stock plunged nearly 4% on Thursday and was down a further 10% on Friday. It fell a further 12% on Monday.

Delisting takes time and the warning gives the home goods company 60 days to submit a plan to become compliant with Nasdaq’s rules. That is March 13, 2023. If Nasdaq accepts the plan, BBBY will get 180 days from the day the quarterly report was due to file it. The date falls on July 10, 2023.

Earlier, the meme stock rallied on hopes that it may find buyers at last. Private equity firm Sycamore Partners was in talks with the company, according to reports. As part of its bankruptcy process, the firm seeks to sell its assets, including its Buy Buy Baby chain. Shares rose over 10% on Tuesday but pared back on Wednesday. The near-bankrupt company also saw an an astronomical 133% rise on Jan. 12 after closing near historic lows on Dec. 30.

On Jan 5, reports indicated that the home good store was preparing to seek bankruptcy protection. The company hoped to avoid debt payments of $1.5 billion falling due in Feb through a Chapter 11 filing.

In its third quarter, the Union, NJ based company had a 33% decline in sales of $1.25 billion with loss per share of $3.65. According to other reports however, the stock is rising on the first short squeeze of 2023. A short squeeze is when a stock rallies and sellers have to cover their short positions. That drives the stock even higher in the short term.

The retailer rose over 200% to 53.90 in January 2021 and settled back to long-term averages for the rest of the year. It then spiked more than 30% to $30.06 in March 2022, with frenzied buying after entrepreneur Ryan Cohen bought a 9.8% stake. Shares crashed in August after he exited his position.

BBBY stock is trading just below $4.

Is Tesla A Meme Stock?

Misfortune has been snowballing for Tesla (TSLA) this year. The stock traded at a high of 390.91 in Dec. 2021 and fell more than 50%, slicing through its 50- and 200-day moving averages. Earnings are due after closing bell on Wednesday. Share were flat at closing bell.

Unpredictable moves are common in meme stocks. Is the Tesla price action a signal for the next meme move?

Are Meme Stocks A Buy Now?

Meme stocks are speculative plays, known for high levels of unpredictability because they can rally or crash in any market, and at any time. Their meteoric rises and heart-stopping crashes typically depend on social media hype and online interest.

Hyper stock valuations for these companies depend, for the most part, on young fans and an anonymous following that can appear or disappear overnight. Retail investors dominate the interest in these stocks.

These stocks do follow traditional investment wisdom, which says you should buy stocks based on growth and performance.

Top Meme Stock to Watch

GameStop saw sales fall 8% to $1.18 billion, from $1.29 billion in its third quarter. A loss per share of 31 cents was slightly better than the 35-cent loss the previous year. The meme stock rose over 11% in strong volume. The action has started a mini-meme rally, although the stock is far removed from its 2021 frenzy.

The video game retailer grew a fan base in late 2020. In January 2021, the stock shot up 1,625% to 81.25 and then crashed to 15 in February 2021. However, it climbed back up to 265 by mid-March. GME is also trading at Feb. 2021 levels.

GME fell over 5% on Wednesday.

 

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