AMC Entertainment Shares Plunge On Proposed Stock Sale As Chain Cites Soft Box Office, Cash Burn
UPDATED with closing stock price: AMC Entertainment shares fell more than 14% Thursday to close at $3.72 on jitters over the company’s financial health. The nation’s biggest theater chain said early in the day it might sell up to $250 million-worth of stock, citing a low first-quarter box office. Shares were down more than 16% before the opening bell.
The company said in an SEC filing it intends to use the net proceeds, if any, from the sale “to bolster liquidity, to repay, refinance, redeem or repurchase its existing indebtedness (including expenses, accrued interest and premium, if any) and for general corporate purposes.”
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Reasons for the offering, it said, are to enhance “liquidity in light of the low first quarter box office, resulting in part as previously disclosed from” Hollywood strikes last year, as well as “increased seasonal working capital requirements, and the resulting cash burn the Company has experienced.”
AMC’s high debt after years of expansion pre-Covid had it teetering on the brink of bankruptcy during the pandemic (saved then by its meme stock status that inflated the stock) and under considerable financial strain after the WGA and SAG-AFTRA strikes disrupted the release schedule. A legal ruling last summer allowed it to sell stock, a lifeline it needed to raise cash, as it plans to do now. The company’s large cadre of retail investors dislikes new stock sales since that dilutes their stake. CEO Adam Aron has chastised them on conference calls for not understanding that a cash cushion is key to the company’s ability to continue.
The exhibitor’s fourth-quarter numbers released in February were much improved from the year earlier in part due to a bum from Taylor Swift: The Eras Tour film, which it also distributed. But Wall Street continues to watch the numbers carefully.
“Significant uncertainty remains for AMC due to its high degree of financial leverage. Management has been successful in raising equity that has improved AMC’s potential to move past the pandemic, but risk levels remain high,” said Barrington Research analyst James Goss after the Q4 numbers.
Moody’s Investor Services said in its last report in late Jan. that its AMC profile “continues to reflect our view that further distressed exchanges or a potential balance sheet restructuring could occur given AMC’s untenable debt capital structure.”
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