With the last days of AMC Entertainment (NYSE:AMC) and its battle against the APEs (NYSE:APE) finally in sight, AMC just took another hit, but one that left investors surprisingly upbeat, as shares are up at the time of writing. Citi, by way of analyst Jason Bazinet, put AMC on its downside catalyst watch list, noting that the long-fought move to turn AMC Preferred Equity (APE) units into actual AMC stock is likely to go off. Bazinet carefully pointed out a fact that most who have been watching the AMC/APE struggle were already familiar with: AMC stock trades higher than the APE unit, which means AMC stock prices will likely drop if APE units become AMC stock through a court decision.
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Given that, just last week, the court case to determine the ultimate future of APE units started by someone pulling a fire alarm, this is clearly a big deal. Further, with a report from The Street noting that another short squeeze is likely already in progress as AMC shares’ borrowing costs better than tripled at one point on Friday, it’s a safe bet that something is brewing. With AMC, in turn, warning that its cash burn rate is unsustainable and bankruptcy may be ahead, that 30-day catalyst warning may prove more right than anyone expected.
Analysts appear to be expecting a catastrophe in the making as well. With three Sell ratings and two Holds, AMC stock is a Moderate Sell. Worse, with an average price target of $2.16, AMC stock also comes with 52.48% downside risk.