Why Sundial and AMC Stocks Dropped Today

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What happened

Shares of Sundial Growers (NASDAQ:SNDL) and AMC Entertainment (NYSE:AMC) gave back a portion of their recent gains on Friday. By the close of trading, Sundial’s and AMC’s stock prices were down 15.5% and 6.7%, respectively.

So what

After rocketing from $12.08 on May 21 to as high as $72.62 on June 2, AMC’s shares have pulled back sharply in recent days. AMC has a legion of fans on social media sites like Reddit and Twitter. Many AMC bulls have promoted the stock in recent weeks on investing forums, such as the 10 million member WallStreetBets group on Reddit, which likely helped to drive up its price.

Sundial is another popular stock, with more than 370 million shares traded on Friday alone. Like AMC, Sundial has a large following on Reddit and other social media sites. The stock also received a boost earlier this week, when Amazon announced that it would support federal marijuana legalization efforts. 

Sundial Growers and AMC Entertainment pulled back on Friday. Image source: Getty Images.

However, AMC plunged on Thursday after the movie theater chain announced another share sale. It raised roughly $587.4 million, but it diluted shareholders in the process. And on Friday, Trey Collins, a YouTube host who is popular among AMC bulls, said he believed the stock was worth only about $20 to $25 per share, or roughly half its current price.  

Sundial didn’t have much in the way of company-specific news on Friday, but it’s likely that some investors chose to take profits in the stock after its sharp gains earlier in the week. 

Now what

AMC and Sundial have made significant progress in shoring up their cash reserves via multiple share offerings in recent weeks. However, the resulting dilution will weigh on their ability to generate sustainable per-share profits, which is something that has already proved challenging for both businesses in recent years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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