Why AMC Entertainment Stock Jumped 18% Today

What happened

Shares of movie theater operator AMC Entertainment (NYSE: AMC) were up 11% as of noon EDT today, after increasing as much as 18% on the day. The jump is in contrast to the stock's performance earlier this week. Shares are still down almost 20% in the last five days, including today's jump.

So what

It was reported by Bloomberg earlier this week that AMC is considering options to manage its rising debt load, including filing for bankruptcy protection, as theaters either remain closed or at restricted capacity, or lack content as movie releases are delayed.

empty movie theater with blank white screen

Image source: Getty Images.

The report said that lenders to AMC have met among themselves to discuss another cash infusion to the company to sustain the operation if it does pursue bankruptcy protection.

AMC said in a Securities and Exchange Commission filing on Tuesday that although about 83% of its U.S. theaters are open, they are restricted to less than 50% capacity. Because of these business conditions, the company said it "anticipates that existing cash resources would be largely depleted by the end of 2020 or early 2021."

Now what

News of increasing coronavirus cases in the U.S. and globally is certainly not helping AMC. So what explains a double-digit increase in the share price today? Frankly, nothing other than a reaction to the sharp decline that's led up to this.

Shares are down over 40% in the last month, including the accelerated decline this week after the company's SEC filing. The stock is approaching its March 2020 lows.

With that kind of drop, some investors are willing to bet that one way or another, the business survives, and are trying to jump in before any positive news arrives.

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