AMC Entertainment shares fall, hitting 52-week low

The branded credit card and its CEO pay freeze did little to appease Entertainment AMC shareholder concern, as shares of the movie theater chain hit a new 52-week low on Wednesday.

Shares of AMC are down more than 85% year-to-date, closing at $3.84 a share on Wednesday. A stock drop occurs when the company has devised several plans to raise more capital to pay off debtand invest in theater acquisitions and upgrades.

While the company was able to bounce off the brink of bankruptcy in 2021 thanks to millions of retail investors who turned its stock into a meme stock, the company has struggled to maintain momentum. in 2022.

Concerns about AMC’s huge debt burden, which it had built up before the pandemic, resurfaced as the company diluted its stock and faced a slow-recovering film industry. Complementary to the company, including the popcorn business and even a gold minewas unable to move the needle as the stock price continued to plummet.

For many quarters, AMC’s revenue was not enough to cover expenses. Much of that is due to a small amount of Hollywood films, the result of production delays due to the pandemic, and lower ticket sales.

There is no doubt that the domestic and global box office will recover stronger in 2023, when more films are released to the public. However, analysts warn that moviegoers may not return to pre-pandemic levels until 2024 or 2025.

Eric Handler, media and entertainment analyst at MKM Partners, says where AMC’s problem lies in its fundamentals.

He noted that the recent APE stock issuance and previous stock sale had allowed AMC to pay off some of its debt of more than $5 billion, but the overall valuation of the company was unchanged.

“It’s a negligible impact on valuation,” Handler said. “A credit card is a nice little thing. The popcorn business is a nice little thing. All of these are low-risk and add to the business.”

However, he added, things don’t go so well when you look at AMC’s capital structure — the large number of shares outstanding, combined with its high debt levels.

“The stock doesn’t have much equity value. And it’s still trading at a valuation significantly higher than where theater operators traditionally trade,” he said. “At some key fundamental point.”

AMC did not immediately respond to a request for comment.

AMC’s latest attempt to tune the ship is a capital deal with Antara Capital, one of the company’s major creditors, to raise $110 million through the sale of its APE units to Antara with price 66 cents a unit. Antara will also exchange $100 million of AMC banknotes for 91 million units of APE, this will reduce AMC’s annual interest expense by about $10 million.

CEO Adam Aron said in a statement last week: “Clearly, the existence of APEs has achieved exactly what they were meant to be. “They have allowed AMC to raise much of their welcome cash, reduce debt, and in so doing reduce debt on our balance sheet and allow us to explore possible M&A.”

“However, given the consistent trading discount we typically see in the price of APE units compared to AMC common stock, we believe that simplifying our capital structure is in the interest of our customers.” shareholders’ best interests, thus eliminating the discount that has already been applied to APE units in the market,” he added.

The company’s board of directors announced last week that it plans to hold a special meeting for shareholders to vote on the proposal, including seeking permission to issue a reverse stock split for the company. common stock of AMC.

AMC declined to comment further when contacted by CNBC.

“The steps they are taking right now, in terms of converting the APE to AMC, if that goes through, and then doing the reverse stock split, if that goes through, that will go through. put them back where they were in 2019,” said Alicia Reese, an analyst at Wedbush.

Essentially, AMC wants to offer its shareholders one share for every 10 shares they own, converting the value of individual shares from less than $4 to less than $40.

This new valuation doesn’t make much sense to some analysts, who note that AMC may have more cash on hand than it did in 2019, but it still has a similar debt burden and no dividend.

“It didn’t work,” Reese said. “All it’s saying right now is stocks are still pretty much overvalued. And they still have quite a bit to go down.”