Why AMC Fell This Week (and Cineworld and Cinemark Followed)

The broad market may be at a breakeven for the week, but stocks of movie theater chains certainly aren't. Shares of Cineworld Group (OTC: CNNW.F), Cinemark Holdings (NYSE: CNK), and IMAX Corporation (NYSE: IMAX) are all down significantly since last Friday's close. But they're being led lower by AMC Entertainment Holdings (NYSE: AMC). The company's decision to not sell more shares at their currently elevated price gets the superficial blame for the pullback, but odds are good this weakness was materializing no matter what.

The king of the meme stocks was close to being diluted...again. AMC's management had been prepared to put the matter of a secondary offering to a shareholder vote. Those plans were officially canceled (postponed, technically) on Tuesday, however, when CEO Adam Aron suggested he feared such a vote could split the company's shareholder base.

Given that 80% of the company's investors are retail shareholders rather than institutions like mutual funds or hedge funds, the prospect of half of this shareholder base being pitted against the other half is very real. This prospect is augmented by the fact that many of these owners are new investors who stepped into their trades based on advice found at various online message boards.

Source Fool.com