Well, it was a top week for the S&P/ASX 200 Index (ASX: XJO) until today. The ASX 200 has taken its lead from the US markets overnight and is having a dreadful day of trading this Thursday so far.

At the time of writing, the ASX 200 has plunged by a nasty 1.77%, putting the index back to around 6,860 points.

But rather than dwelling on all of that, let’s instead check out the shares currently topping the ASX 200’s share trading volume charts, according to investing.com.

The 3 most traded ASX 200 shares by volume this Thursday

South32 Ltd (ASX: S32)

Our first ASX 200 share worth checking out today is mining giant South32. We’ve seen a notable 10.97 million South32 shares exchanged on the markets so far this Thursday. There’s been no news from the company itself today.

However, the South32 share price looks to have been caught up in the market’s foul mood regardless. The miner has lost a painful 3.16% today and is down to $3.68 a share at present. This has probably elicited the high volumes we are seeing.

Core Lithium Ltd (ASX: CXO)

Next up this Thursday is ASX 200 lithium share Core Lithium. So far this session, a hot 17.18 million Core Lithium shares have been traded on the share market. Core Lithium is another share that has had a very bouncy day. The company plunged as low as $1.32 a share this morning, but has recovered somewhat in the later half of the trading day.

Even so, the company remains down by 2.87% at $1.36 a share. It’s almost certainly this steep fall that has caused the trading volumes we are seeing.

Pilbara Minerals Ltd (ASX: PLS)

Finally this Thursday we have another ASX 200 lithium company in Pilbara minerals. Pilbara has seen a sizeable 17.7 million shares bought and sold on the ASX today so far. Again, it seems some volatile share price action is what is to thank for this elevated volume.

Pilbara shares also plunged in value this morning, going as low as $4.89 a share. But, just like Core, investors seem to have gotten cold feet with these losses, and Pilbara shares have bounced back to $5.05 a share at present, down 1% for the session.

The post Here are the 3 most traded ASX 200 shares on Thursday appeared first on The Motley Fool Australia.

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More reading

• Why is the BetaShares Nasdaq 100 ETF taking a thrashing today?
• 3 ASX 200 directors buying up their company shares this week
• Why is the Core Lithium share price tanking 3% today?
• Perpetual share price surges 9% on new takeover bid
• Coles shares underperformed the market last month. What’s next?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) is on course to record a sizeable decline. In afternoon trade, the benchmark index is down 1.8% to 6,861.1 points.

Four ASX shares that have not let that hold them back are listed below. Here’s why they are rising:

A2 Milk Company Ltd (ASX: A2M)

The A2 Milk share price is up 4.5% to $5.50. Investors have been buying this infant formula company’s shares after it was given approval to import, sell, and distribute products in the US market. Management estimates that it will ship 1 million cans of infant formula to the country during the second half.

New Hope Corporation Limited (ASX: NHC)

The New Hope share price is up 5% to $6.06. This morning, this coal miner announced plans to undertake a $300 million on-market share buyback. The buyback is expected to commence on 17 November and run for 12 months. Management made the move on the belief that the company’s “current share price does not accurately reflect the underlying value of the Company’s assets.”

Perpetual Limited (ASX: PPT)

The Perpetual share price has jumped 7% to $28.85. This follows news that the fund manager has received but rejected a $30.00 per share takeover offer. Management believes the offer from a consortium comprising BPEA Private Equity Fund VIII and Regal Partners “materially” undervalues the company.

Talga Group Ltd (ASX: TLG)

The Talga share price is up over 5% to $1.29. This morning the battery materials company advised that the hearing for its Vittangi Graphite Project mine environmental permit has been scheduled by the Swedish Land and Environment Court. The hearing is expected to conclude the week of 20 February 2023. If approved, it would be a major step forward for the project.

The post Why A2 Milk, New Hope, Perpetual, and Talga shares are charging higher appeared first on The Motley Fool Australia.

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More reading

• It’s not all bad news for ASX All Ords shares today. Here are some big winners
• Perpetual share price surges 9% on new takeover bid
• Why is the A2 Milk share price defying the selloff and jumping 9%?
• A2 Milk share price on watch following US FDA approval
• Here are the top 10 ASX 200 shares today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Writing in its latest monthly update, leading fund manager QVG Capital reports a positive return for its Long Short Fund in October, up 3.6% for the month versus a gain of 5.8% for the S&P/ASX 300 Index (ASX: XKO).

The QVG Long Short Fund is a ‘best ideas’ fund with the flexibility to take advantage of the best ASX opportunities regardless of share price direction or market capitalisation.

The fund’s solid performance in October was driven by its long positions, the top contributors being Aristocrat Leisure Limited (ASX: ALL), Hub24 Ltd (ASX: HUB) and IDP Education Ltd (ASX: IEL).

Aristocrat Leisure offers a diverse range of products and services, including electronic gaming machines, casino management systems, and free-to-play mobile games.

Although the Aristocrat Leisure share price jumped 15% higher in October, in tune with other ASX growth stocks trading on premium valuations, Aristocrat shares are still down 23% over the past 12 months. 

Writing about the company, the fund says Aristocrat is a beneficiary of the stronger US dollar. In addition, the QVG Capital Long Short Fund says, “feedback from the Global Gaming Expo of continued strong trading over recent months both for the US land-based market and Aristocrat’s market share bodes well for near-term earnings”.

The Hub24 share price climbed more than 20% in October on the back of a September quarter trading update which showed resilient inflows onto the platform amid elevated levels of stock market volatility. 

“Given the nature of financial markets, we were impressed with the strength of HUB’s flows. Commentary around revenue margins and operating cost growth were also encouraging,” the portfolio manager said in its monthly update. 

The IDP Education share price jumped almost 12% higher in October as the provider of international student placement services and high-stakes English language testing services continued to bounce back from a difficult period impacted by the pandemic.

Writing in its update, the QVG Capital Long Short Fund said it expects the headwind of falling valuations to no longer be the driving force behind the ASX stock’s performance. Going forward, the fund expects earnings growth will be the key driver of future returns, saying its English language testing and student placement divisions are recovering strongly. 

“IDP has a runway of multiple years of ~20% revenue growth as they exploit the benefits of their scale to entrench their market leadership.”

IDP Education shares trade at 75 times trailing earnings, with that multiple forecast to come down to around 50 times FY23 earnings based on S&P Capital IQ forecasts.

On the short book, QVG names EML Payments Ltd (ASX: EML), Megaport Ltd (ASX: MP1) and Appen Ltd (ASX: APX) as top contributors to returns in the month of October. 

Respectively, regulatory issues, increased cash burn and another downgrade weighed on these share prices.

The EML Payments share price was hit for six on the last day of October when the global payments company was hit with yet more regulatory concerns.

The Megaport share price took a dive after the network-as-a-service provider released a lacklustre first-quarter trading update.

The post Leading fund manager names the 3 ASX stocks that drove its returns higher in October appeared first on The Motley Fool Australia.

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More reading

• Why has the EML share price rebounded 30% in 2 days?
• Here are the top 10 ASX 200 shares today
• Here are 3 ASX All Ords shares that are off to the races today
• These were the worst-performing ASX 200 shares in October
• These were the best-performing ASX 200 shares in October

Motley Fool contributor Bruce Jackson has positions in Hub24 Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Appen Ltd, EML Payments, Hub24 Ltd, Idp Education Pty Ltd, and MEGAPORT FPO. The Motley Fool Australia has positions in and has recommended EML Payments and Hub24 Ltd. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Over the last 24 hours, the price of Litecoin (CRYPTO: LTC) jumped nearly 8% as of 3:40 p.m. ET after the payments company MoneyGram (NASDAQ: MGI) announced that it would enable users to trade and store several cryptocurrencies, including Litecoin, on its app.

So what

In addition to Litecoin, Moneygram will also allow users to trade and store Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH). However, with Litecoin having much less of a following and a much smaller market cap, the news did not move Bitcoin and Ethereum in the same way it boosted Litecoin.

MoneyGram’s CEO Alex Holmes said in a statement: “Cryptocurrencies are additive to everything we’re doing at MoneyGram. From dollars to euros to yen and so on, MoneyGram enables instant access to over 120 currencies around the globe, and we see crypto and digital currencies as another input and output option.”

Moneygram has served more than 150 million people over the last five years, so it certainly has enough scale to spread more awareness of Litecoin and potentially grow adoption of the token.

Now what

Litecoin is actually one of the earlier cryptocurrencies, having been launched in 2011. At the time, I believe the value was that it could process more transactions than Bitcoin. There is also a finite amount of 84 million Litecoin tokens.

Unfortunately, since then a ton of new blockchain networks have popped up, all seeking to increase the number of transactions per second they can process. For this reason, and given the ensuing crypto winter, I’m really only interested in the more established tokens like Bitcoin and Ethereum right now.       

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why the price of Litecoin is rising today appeared first on The Motley Fool Australia.

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More reading

• Why A2 Milk, New Hope, Perpetual, and Talga shares are charging higher
• Leading fund manager names the 3 ASX stocks that drove its returns higher in October
• Why is the BetaShares Nasdaq 100 ETF taking a thrashing today?
• It’s not all bad news for ASX All Ords shares today. Here are some big winners
• 3 ASX 200 directors buying up their company shares this week

Bram Berkowitz has positions in Bitcoin, Ethereum, and Litecoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin and Ethereum. The Motley Fool Australia owns and has recommended Bitcoin and Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.   

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The BetaShares Nasdaq 100 ETF (ASX: NDQ) is down 2.71% today amid a broader sell-off across United States markets overnight.

Units in the exchange-traded fund (ETF) currently trade for $26.60 each. Earlier they fetched a high of $26.65 and a low of $26.53.

The S&P 500 Index (SP: .INX) is currently down 2.5%. Meanwhile, the Nasdaq Composite Index (NASDAQ: .IXIC) is down more at a 3.36% loss.

The shockwave of US markets falling overnight has also reached us here in Australia. All the sector indices are in the red today and the S&P/ASX 200 Index (ASX: XJO) is down too at a 1.84% loss.

There have been some major developments that could have caused the market to panic. Let’s cover the highlights.

US interest rates rise

The US Federal Reserve approved a 0.75% interest rate hike yesterday, thus bringing the benchmark lending rate to a range of 3.75% to 4%.

This rate hike increase is the most aggressive attempt by the Fed to get inflation under control since the 1980s.

While my Fool colleague Bernd notes that the massive rate hike was expected, some of the comments made by the Federal Reserve’s chair Jerome Powell in a post-announcement news conference have apparently caught investors off guard.

Some of these comments included the admission that inflation remains sticky and that interest rates may not yet have reached a level to sufficiently cool down the overheated economy.

Powell said:

We think we have a ways to go. Before we get to that level of interest rates that we think is sufficiently restrictive.

He continued:

The level of rates that we estimated in September, the incoming data suggests that’s actually going to be higher. There is no sense that inflation is coming down… We’re exactly where we were a year ago.

Another insight gleaned from Powell included that it may be “premature” for the Fed to discuss pausing interest rate hikes.

BetaShares Nasdaq 100 ETF price snapshot

The BetaShares Nasdaq 100 ETF is down 26.3% year to date. That’s underperforming the ASX 200 which has lost 7.88% over the same period.

The post Why is the BetaShares Nasdaq 100 ETF taking a thrashing today? appeared first on The Motley Fool Australia.

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More reading

• 3 ASX 200 directors buying up their company shares this week
• Why is the Core Lithium share price tanking 3% today?
• Perpetual share price surges 9% on new takeover bid
• Coles shares underperformed the market last month. What’s next?
• ASX 200 dives on hawkish Federal Reserve interest rate policies

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia has positions in and has recommended BETANASDAQ ETF UNITS. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The All Ordinaries Index (ASX: XAO) is 1.85% in the red today, but these four All Ords shares are soaring higher.

The A2 Milk Company Ltd (ASX: A2M), Perpetual Ltd (ASX: PPT), RHYTHM Biosciences Ltd (ASX: RHY) and Weebit Nano Ltd (ASX: WBT) share prices are all charging ahead.

The market overall is struggling today amid the US Federal Reserve raising interest rates by 0.75%. So why are these companies surging ahead of the ASX All Ords Index?

A2 Milk

A2 Milk shares are surging nearly 6% today. The company will be selling its infant formula to the United States. A2 Milk has received US Food and Drug Administration (FDA) approval to supply the product to the USA. A2 Milk sees this as a “significant opportunity” to develop its infant milk formula brand in the long term. However, A2 Milk added:

However, at this early stage, it is difficult to predict the IMF sales potential in the US which is a highly competitive market to enter.

Perpetual

Perpetual shares are rising 8% today. The company has rejected an offer from Regal Partners Limited and BPEA Private Equity Fund VIII to acquire 100% of Perpetual’s shares. Perpetual said the $30 cash per share offer “materially undervalues Perpetual”. Perpetual said:

This offer is uncertain and conditional and the Perpetual Board believes that it is not in the best interests of its shareholders to engage on this offer and has therefore rejected the offer.

Rhythm Biosciences

The Rhythm Biosciences share price is soaring nearly 10% today. Rhythm has expanded its international regulatory footprint. This includes registering cancer detection technology ColoSTAT product with the New Zealand national database of medical devices. This will mean the technology can now be marketed and sold in New Zealand.

Commenting on the news, CEO and managing director Glenn Gilbert said:

Rhythm is pleased to expand its international regulatory approval footprint into New Zealand which enables the Company to commence marketing and sales activities for ColoSTAT.

Weebit Nano

This ASX All Ords share is jumping nearly 6% today despite no news from the company. Weebit is a memory and semiconductor technology company. In a presentation this week, the company advised it has made significant technical and commercial progress in the last 12 months. The company is developing ReRam NVM memory technology. The NVM market is forecast to be worth $2.9 billion by 2027, Weebit Nano highlighted.

The post It’s not all bad news for ASX All Ords shares today. Here are some big winners appeared first on The Motley Fool Australia.

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More reading

• 2 ASX healthcare shares smashing the All Ords today
• Why is the A2 Milk share price defying the selloff and jumping 9%?
• A2 Milk share price on watch following US FDA approval
• A2 Milk share price climbs amid legal stoush
• Why is the A2 Milk share price underperforming on Tuesday?

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Zip Co Ltd (ASX: ZIP) share price is down in line with the rest of the market amid the company holding its annual general meeting (AGM) today.

The Zip share price is down 2.3% to 62.5 cents at the time of writing. By comparison, the S&P/ASX All Ordinaries Index (ASX: XAO) is down 1.8%.

At the AGM, Zip provided an investor presentation and CEO and managing director Larry Diamond made a speech.

Let’s see what he had to say.

EBTDA cash flow positive by first half of FY24

The key takeout from today’s AGM is that the buy now, pay later (BNPL) share expects to turn cash EBTDA (earnings before taxes, depreciation and amortisation) positive as a group in the first half of FY24.

Zip mapped out its strategy to become cash flow positive in its annual report in late September.

Following various changes in 2022, including the shutdown of its Singapore and United Kingdom businesses, Zip is now focused on two core markets — Australia and New Zealand, and the US.

The Australia and New Zealand business has been cash flow positive for four years already.

Zip now anticipates that its United States business will be cash flow positive by the end of FY23.

We’ve got the funds to reach profitability

Diamond said Zip has approximately $141 million in available cash and liquidity:

We are confident that we have the balance sheet to fund the Company through to cash EBTDA profitability.

We expect to see the US exiting FY23 cash EBTDA positive and to neutralise the cash burn from our rest of world footprint during the second half of FY23.

We are on track to deliver positive cash EBTDA as a group in the first half of financial year 2024.

$10 trillion addressable market in US

Zip sees the US business as crucial for the company’s growth. This prompted Diamond and his family to relocate to the US this year.

Diamond said the US market was on a similar trajectory to Australia’s market:

In the US, the addressable market is estimated to be over US$10 trillion and BNPL penetration is still under 2%, including just 4% of e-commerce and 1% of in-store spend. This demonstrates the sheer size, and early stage of the BNPL opportunity that we are positioned to capture.

With Worldpay predicting BNPL volumes to more than double in 2025 from 2021 levels, we believe that the US penetration is on a similar trajectory to a more mature market like where we started in Australia.

In Australia, around one-third of adults have a BNPL account and this number is growing. Zip’s brand awareness amongst 18-45 is now close to 60%.

In the last financial year, Zip’s Australian business made a record $28 million cash EBTDA, 2.5 times cash EBTDA from financial year 2021. This clearly demonstrates the operating leverage of the business model and the potential to deliver strong EBTDA growth at scale.

Zip share price snapshot

The Zip share price is down 86% in the year to date.

The shares have been rangebound in the low 60 cents since early October.

They are currently trading 43% above their 52-week low of 44 cents.

The post Zip share price slides despite CEO pinpointing profit timeline appeared first on The Motley Fool Australia.

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More reading

• What could this proposed regulation mean for Zip shares?
• Why is the Zip share price up 5% on Tuesday?
• Why has the Zip share price dumped 12% in October?
• Could this represent another nail in the Zip share price coffin?
• Zip shares have fallen 85% this year but Diamond still says ‘We can be the next CBA’

Motley Fool contributor Bronwyn Allen has positions in ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Insiders appear to be backing these S&P/ASX 200 Index (ASX: XJO) shares, with three directors bolstering holdings in their own companies this week.

Insider buying is generally a good sign that those in the know believe their company’s stock is trading at a reasonable price. It can also be an indication that those working behind the scenes have confidence in their business.

So, which ASX 200 shares seemingly appear attractive to those in the know? Keep reading to find out.

3 ASX 200 shares being bought by insiders this week

The largest insider purchase of the three ASX 200 shares by value was made by Cochlear Limited (ASX: COH) director Michael del Prado.

The director forked out US$192,000 on 150 shares in the hearing implant device manufacturer, paying US$128 apiece to do so, on Tuesday.

The purchase was made on the United States over-the-counter market and boosted Prado’s holding in the company to 450 shares.

The largest by number of shares was an indirect on-market trade of 15,000 shares in Iluka Resources Limited (ASX: ILU).

Chair of the mineral sands miner, Rob Cole, was behind the purchase, made on Monday. He paid a total of $130,654.14 for the parcel, representing around $8.71 per share. The insider now holds 37,000 shares in the company.

The buy has already turned a slight return. The Iluka share price is trading at $8.79 right now.

The final ASX 200 insider buying shares in their own company this week is IGO Ltd (ASX: IGO) director Justin Osborne.

He indirectly bought 10,000 shares in the diversified metals miner on Tuesday, spending a combined $148,350 to do so. That equates to around $14.835 per stock.

Unfortunately for Osborne, the company’s share price has since slipped. Buying into the company right now would see an investor pay $14.74 a share. That’s 0.6% less than the director’s purchase price.

The post 3 ASX 200 directors buying up their company shares this week appeared first on The Motley Fool Australia.

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More reading

• Why is the Core Lithium share price tanking 3% today?
• Perpetual share price surges 9% on new takeover bid
• Coles shares underperformed the market last month. What’s next?
• ASX 200 dives on hawkish Federal Reserve interest rate policies
• Are IGO shares a buy after a huge quarter of profit growth?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Cochlear Ltd. The Motley Fool Australia has recommended Cochlear Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Novonix Ltd (ASX: NVX) share price has taken a tumble on Thursday.

In afternoon trade, the battery materials and technology company’s shares are down over 5% to $2.55.

Why is the Novonix share price sinking?

Investors have been selling down the Novonix share price on Thursday amid broad market weakness.

It isn’t just Novonix that is falling, the majority of shares on the S&P/ASX 200 index (ASX: XJO) have dropped into the red. This has led to the benchmark index falling 2% today.

Investors have been hitting the sell button following a selloff on Wall Street overnight after the US Federal Reserve increased rates by 0.75% and warned of more pain ahead.

Higher risk shares, such as battery materials shares, have fared poorly and are falling even more than the market.

For example, the Lake Resources N.L. (ASX: LKE) share price is currently down 5% and the Liontown Resources Ltd (ASX: LTR) share price has fallen 3%.

Though, it is worth noting that even after today’s sizeable decline, the Novonix share price is still up almost 50% since this time last month. That strong gain was driven largely by news that the company has been earmarked for a US$150 million government grant from the US Department of Energy.

The post Why is the Novonix share price tanking 5% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Penny stocks are shares in companies that trade for less than $5.00 per share. With a current price of $6.67, AMC Entertainment (NYSE: AMC) isn’t far from that mark. And while the stock might look like a good deal, it is cheap for a reason. Let’s explore why the struggling movie theater operator looks poised for more downside over the long term.

Profitability challenges and weird managerial decisions

We all know the COVID-19 pandemic devastated in-person entertainment venues like movie theaters, which saw their locations closed for much of 2020 and 2021. Now that the industry is back on its feet, sales are soaring — but profitability has been slower to return. AMC’s third-quarter earnings report highlights this challenge. While revenue jumped 162% year over year to $1.17 billion, the company generated a net loss of $121.6 million mainly because its operating expenses outstripped its sales. 

But management’s questionable decision to purchase a 22% stake in precious metals company Hycroft Mining is also contributing to the problem — generating a $57.3 million investing expense (a non-cash loss) in the period. It is unclear what relation an asset like Hycroft has to AMC’s core movie theater business, and the acquisition showcases a pattern of unorthodox and arguably reckless managerial decision-making at the company. Unfortunately for investors, it doesn’t end there. 

Alarming levels of equity dilution 

Other pandemic losers, such as cruise operator Carnival Corporation undertook vast amounts of long-term debt to survive the crisis. AMC had a different approach: equity dilution. The company raised capital by issuing more of its stock — a process that increased its shares outstanding from 135,528 in the second quarter of 2019 to 516,821 in the corresponding period of 2022, an increase of 281%. 

From a management perspective, this was probably the right move. AMC’s stock price has been artificially inflated by the meme stock movement. And the dilution allowed the company to quickly raise cash without undertaking the solvency risk that would have come with debt financing. But there is no such thing as free money. Equity dilution is a problem for investors because it reduces their claim on current and future earnings. This can lower the fundamental value of their shares. 

AMC’s management also seems to be taking their dilution habit too far. 

In April, the company announced a special dividend of preferred shares called AMC Preferred Equity (NYSE: APE) units at a rate of 1 for 1 with the company’s common stock outstanding. Management promptly began diluting the new equity by agreeing to sell 425 million of the new shares in September. On the surface, APE may look like a way to sell more shares without diluting the original AMC equity, but there is a catch. 

APE shares have full voting rights and can become convertible to AMC common stock if shareholders approve. With the number of APE shares rising quickly, the dilutive chickens could eventually come home to roost. 

AMC is cheap for a reason 

While AMC’s low stock price might catch the attention of bargain-hungry investors, it pays to look before you leap. Even if the company’s operational challenges are eventually resolved, management’s questionable decision-making and relentless equity dilution are major red flags for long-term investors. Continued declines look likely.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Could AMC Entertainment become a penny stock? appeared first on The Motley Fool Australia.

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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Carnival. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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