A clutch of stocks favored by retail traders tumbled on Monday in volatile trading as news that UK-based Cineworld warned of a possible bankruptcy sent AMC Entertainment Holdings' shares diving almost 40% on the day that the U.S. movie chain's preferred shares started trading.

Bed Bath & Beyond Inc and GameStop Corp also slid as AMC's preferred stock, trading under the ticker "APE", opened at $6.21 on the New York Stock Exchange. AMC common shares were nearly 40% lower at $10.93.

The American movie chain said its preferred shares, intended as dividend, will have the same voting rights as AMC common stock and could be used for raising capital in the future.

Trading of both classes of shares was halted multiple times in volatile trading. AMC and APE shares were together trading at $17.14, which was below than AMC's last closing price of $18.02, according to Reuters calculations.

Bed Bath & Beyond Inc, was down 3%, continuing Friday's 40.5% slump after billionaire Ryan Cohen abruptly dumped his stake in the struggling retailer.

Cohen had built a following last year of loyal individual investors who bet on his turnaround of video game retailer GameStop Corp. GameStop was down 4% on Monday.

"A lot of the meme-ers were on the Ryan Cohen bandwagon and now that he's gone I think a lot of them are hitting the exit button," said Dennis Dick, head trader and market structure analyst at Triple D Trading. "So you had similar investors in Bed Bath and Beyond and Gamestop and AMC."

Traders said AMC shares tanked due to the stock issue and after Cineworld, which owns Regal cinemas in the United States, warned that it was staring at a possible bankruptcy filing due to debt that soared during the pandemic.

On Friday, AMC reiterated that it was hit by a "relatively weak" film slate in the third quarter of 2022.

"The AMC distribution of "APE" is somewhere between a stock split and a stock dividend," Rick Meckler at Cherry Lane Investments. "To understand the price movement in AMC today, you need to add the current price of AMC stock with the price of APE. This seems designed to effectively allow for the issuance of more equity by AMC without technically breaking the company's promise to not issue more common shares further potentially diluting their value."

Thomas Hayes, chairman of Green Hill Capital said the security was AMC "pretending to give existing shareholders something of value, but in reality they are just paving the road for future dilution."

The COVID-19 lockdowns severely impacted the business of cinema operators. However, AMC managed to raise $1.8 billion in 2021, capitalizing on the rally triggered by retail investors' interest in meme stocks, in a sharp contrast to Cineworld's fate.

AMC shares have jumped over 150% since the end of 2019, whereas Cineworld lost about 99% of its share value in the same period.

"AMC's short term challenges remains clear with today announcement, and the market is pricing those in the huge AMC price drop we see," said Guido Petrelli, CEO of Merlin Investor.