Trading in AMC Entertainment Holdings shares was restricted yesterday on several trading platforms, but the company took advantage of its sudden popularity this week to give itself extra financial impetus and be better prepared for a recovery in consumer spending in the U.S.
The multinational theater company had a difficult year due to the coronavirus pandemic. Some movies have moved their premieres from their more than 1,000 cinemas to streaming platforms like Netflix and HBO. Others postponed their debut. AMC suspended operations in the United States between March and August, then limiting seating capacity after the reopening of some of its cinemas. During the last quarter ended September 30, revenue fell more than 90% to $ 119.5 million, from $ 1.3 billion; and its net loss skyrocketed to $ 905.8 million, an increase of 851% over the same period in 2019. Its poor financial performance was the reason why AMC became one of the best-selling companies in the United States.
But earlier this week, AMC President and CEO Adam Aron said, “any conversation about an impending AMC bankruptcy is completely out of the question.”
Some things made this sunny view possible. After AMC was highlighted by a Reddit forum focused on the stock market, its share price rose 300% on January 27. On January 28, many retail brokers restricted trading in AMC shares. ”Robinhood and E * Trade trading platforms temporarily restricted AMC trading yesterday; while Charles Schwab and TD Ameritrade added requirements on certain trading options.
With a market value of nearly $ 3 billion today, AMC and its debt holders took advantage of the high stock price this week. On January 25, the company announced that it had raised $ 506 million in equity and another $ 411 million in debt. This additional liquidity “should allow the company to survive the winter affected by the dark coronavirus,” said AMC. On the same day, it launched a new offer to sell up to 50 million additional shares.
After two days, AMC announced that it had sold all new shares, in addition to 13.3 million other shares from a previously announced share sale. Resources totaled US $ 304.8 million.
In addition, a group of creditors decided to exchange $ 600 million of loans for shares in the company. For AMC, this means no more interest and no more payments. For Silver Lake, the private equity firm and main lender, this means that there are no more worries about AMC’s ability to repay, just the price of AMC’s shares, which if Redditors have anything to do with it, will continue to rise.
Five days ago, AMC’s operational concerns were serious enough to alert investors that it may not exist for much longer. Now that its financial trail has been extended by more than $ 1 billion, AMC may take longer to negotiate with theater owners about how it will pay past and future lease payments; and with studios about the release of films.
Even with the recent investment interest, experts are still concerned that AMC’s business model will ever return to pre-pandemic levels of success. “For companies like AMC, which depend on people in large numbers and in close environments, I think it will remain a difficult proposition for a long time to come,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Gestão .