After a huge surge earlier this year, AMC Entertainment (NYSE:AMC) has settled into a bit of a trading range. AMC stock will periodically rally toward $50 or fall toward $30, but it ends up stabilizing in the middle of that territory.

Earlier this month, AMC was moving higher once again. However, the company then released its Q3 earnings report, and the upward momentum abruptly ended. Since the earnings report dropped, shares have slid around 10%. That’s not too surprising, as the earnings failed to inspire much confidence. And the CEO’s move to sell a big chunk of stock didn’t help matters. So where does AMC stock go from here?

A Messy Earnings Report

AMC’s latest earnings report included a few positive signs. Revenues were up sharply when compared to 2020. That’s not surprising, but it still made for positive headline numbers. The company’s operating loss was also a little smaller than expected.

If you zoom out, however, the situation looks a lot less encouraging. Prior to Covid-19, AMC generated roughly $5.5 billion in annual revenues, or something like $1.3 billion per quarter on average. This most recent quarter, however, AMC brought in just $763 million in revenues. That’s barely a 50% recovery to pre-Covid levels.

And, indeed, given the current round of inflation, leading to higher prices for both labor and things like electricity, AMC will need to generate substantially more revenue than it did prior to Covid to reach similar levels of profitability. However, there’s no sign of that coming anytime soon as ticket sales remain profoundly weak.

AMC couldn’t even reach a breakeven point in terms of adjusted EBITDA. That’s a dire warning. Meanwhile, the company produced negative $138 million in free cash flow and put up an operating loss of $224 million just over the past three months. These are terrible numbers.

The Path Forward

As of Sept. 30, 2021, AMC had $1.6 billion in cash. This seems solid enough. In isolation, that cash sum could cover several more years of losses at the current operating rate.

The bigger issue comes into play once you consider debt, however. AMC has $5.5 billion in corporate borrowings in addition to some other liabilities. All told AMC has total negative equity of more than $1.6 billion. This means that the company would have little to no value if the firm were to have to reorganize at the present time. And, that negative equity will only grow worse as the company continues to lose $100 million or more per quarter.

The obvious way out of this mess is for AMC to issue more stock to the public. At a $40 share price, a 50 million share offering would raise $2 billion. This would wipe out all of AMC’s negative equity entirely and put it back in positive territory. In addition, the cash raised could be used to pay down debt, thus lowering interest payments and help ensure AMC’s long-term survival.

The AMC community has long talked about keeping the company in business so that future generations can enjoy the in-person movie-going experience. However, that same community’s efforts to block AMC from issuing new stock may well ultimately sink the company. If AMC can’t raise more money, it seems rather likely to sink under its current debtload. Especially as quarterly earnings results continue to be lackluster at best.

Adam Aron Dumps AMC Stock

There was another big blow to sentiment for AMC this earnings season. The company’s CEO and leader, Adam Aron, decided to unload 1.25 million shares of stock, which are worth about $53 million.

This is a huge setback as far as the narrative goes. The whole motto of the AMC community is about everyone sticking together and holding until the big short squeeze happens. Needless to say, having the CEO unload a whole bunch of stock runs contrary to that ethos.

Aron went on Twitter to justify his stock sale decision. That may have satisfied some people’s concerns. And Aron makes some fair points, such as that he still holds more stock and options than he just sold. That makes sense. For many, however, having Aron selling is a big chunk of stock is unforgivable.

The most vocal members of the AMC chat groups and online communities say the stock is worth hundreds if not thousands of dollars per share. So, it’s a bit embarrassing to see the CEO dumping a massive block of shares at $40.

AMC Stock Verdict

AMC’s core business remains a mess. The latest earnings report confirmed that, in case there had been any doubts. There’s no two ways around it, the pandemic has done a number on movie theaters. And, even well into the economic reopening, the movie attendees just aren’t coming back at the speed people had hoped for.

It seems that AMC is going to need to raise more money to meet its long-term debt obligations. Whether or not the AMC shareholder base makes peace with that fact remains to be seen.

In the short-term, social networks and meme traders continue to provide AMC with a tremendous amount of support. I still have a long position in AMC via sold puts precisely due to that fact. Short sellers should focus on something else; it seems evident that AMC stock isn’t going to tank in the near-term.

Over the longer-haul, however, something needs to change for AMC, otherwise its worsening business trajectory will eventually lead to trouble.

On the date of publication, Ian Bezek held a bullish position in AMC stock via sold December $15 strike AMC naked put options. He held no direct position in AMC common stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.