Adam Aron’s Blackmail Saga Is a Red Flag for AMC Stock

Stocks to sell

I hope you don’t own any shares of AMC Entertainment (NYSE:AMC). AMC stock has lost 81% of its value over the past year.    

As if that’s not bad enough for its beleaguered shareholders, CEO Adam Aron gets himself in the middle of an “elaborate criminal” extortion attempt. 

Despite sharing sexually explicit photos and texts in a catfishing scheme run by Sakoya Blackwood that began in March 2022 and culminated in her arrest and conviction in the summer, AMC has only lost 13% of its value since the news hit on Oct. 12.  

Semafor’s Liz Hoffman wrote about the controversy in real-time when it happened in mid-October. She rightly concluded, “Aron is a victim here, and prosecutors say he never compromised corporate secrets. But this is his latest display of questionable judgment and could put new pressure on him from his board or already-restive investors.” Hoffman wrote on Oct. 12. 

Questionable judgment? That is being very generous. Aron should have been gone months ago. 

Is it a red flag? The devil would be proud to wear such a flag. Those who continue to hold AMC stock seriously must question their sanity. 

Here’s why. 

Aron Ousted From NCLH Board

Let me get this straight. 

The man has the dares to resign from the Norwegian Cruise Line Holdings (NYSE:NCLH) board but not his own company. In what world is that normal?

The guy worked for Kloster Cruise Ltd. as CEO, NCLH’s parent, from 1993 to 1996 and served on the company’s board from 2008 through October 2023. 

So, he felt it was necessary to unburden the company that paid him both as an executive and board member for years. Yet the company that made him more than $40 million from stock sales in early 2022 doesn’t deserve the same consideration?

I cannot comprehend how any institutional investor can look themselves in the mirror after this and state without laughing that Adam Aron is a world-class CEO. He’s a buffoon, and if I had time, I’d go back over all of his executive stints to determine if the shareholders of those companies made any money from his so-called managerial greatness. 

As for retail investors, you reap what you sow. I feel no remorse for any losses you might have encountered because of your blind faith in this man. None. 

It’s Not Just the Pics

I already said in the intro that I agreed with Liz Hoffman’s analysis that he was the victim. I wouldn’t want that on anyone, especially someone already married. But it is clear from past examples that Aron’s best days as a CEO are behind him.  

Hoffman linked to a March 2022 story from The Verge that examined his “embarrassingly stupid” $28 million investment in Hycroft Mining (NASDAQ:HYMC), a small-time Nevada-based silver and gold miner. The entire company’s market capitalization is $63 million, half what it was a year ago. It loses lots of money. 

This was the man’s diversification plan. He probably would have done better with Bitcoin (USD:BTC). 

It just occurred to me that I wrote about that idiotic investment in March 2022. I chuckle reading the headline: Renowned Precious Metals Investor AMC Entertainment Makes $28 Million Bet.

“This is not the diversification I thought about last September when I wrote about the company’s lack of revenue streams beyond ticket and concession sales. Not even close,” I wrote on March 18, 2022.

Popcorn: The Last Stand for AMC Stock

I argued that the company’s further diversification into AMC-branded popcorn was also nonsensical despite the obvious tie-in with movie-goers. With $9.2 billion in net debt, it would have to sell a lot of popcorn to whittle that down.

In April, Aron told Wall Street that it was rolling out its popcorn at 2,600 Walmart (NYSE:WMT) stores nationwide. 

“In the early weeks, our popcorn has been selling briskly,” MarketWatch reported the CEO’s April tweet. “Starting this coming weekend, AMC Perfectly Popcorn will start rolling out broadly — on the shelves of 2,600 Walmart stores across the United States.”

He also predicted that the company would sell millions of units at Walmart. 

Aron should not get to see that through. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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