On March 29, 2023, a car drove near the AMC Theater in New York City.
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able AMC Entertainment Capitalizing on the second meme craze?
stocks, side game stationThis week, the “roaring kitten” triggered the massive short squeeze of 2021, posting online for the first time in nearly three years.this Roaring Kitten ReturnsShares of AMC, whose legal name is Keith Gill, have more than doubled since Friday’s close. Shares rose above $6 in afternoon trading Tuesday.
The last time these retail investors rallied around AMC and sent its stock price soaring, the movie theater chain avoided bankruptcy. Now it has a chance to reduce its massive debt burden.
Roth MKM managing director Eric Handler said chief executive Adam Aron made three major acquisitions “in a relatively short period of time” after taking over the company in 2015, including theater chains Carmike, Odeon and Nordic. AMC spent a total of about $3 billion on these deals.
Handler said that while these acquisitions have increased the size of AMC’s theater network, they have also weakened the company’s balance sheet.
“So when the pandemic hit, they got a double whammy because they were already highly leveraged, and then they had to raise more debt to survive and give them more cash,” Handler said.
AMC has paid down nearly $1 billion in debt since the start of 2022, but still has about $4.6 billion in debt.
Wedbush analyst Alicia Reese said AMC has about $20 million due in 2024 and $118 million due in 2025, which “is not a hurdle.” But what needs the most attention is the $2.96 billion that will be raised in 2026.
“I think they will be able to renegotiate some of them, but a lot of them may just be extensions,” Reese told CNBC.
Lenders have been willing to renegotiate terms, but a higher share price could get AMC a better deal.
AMC currently pays about $100 million in interest charges each quarter, which is eating into its underlying profits. Eric Wold, senior analyst at B. Riley Securities, said that with the box office still recovering from the pandemic and strike-related production shutdowns, AMC is unable to absorb its fixed expenses such as rent, employee wages and other operating costs.
“The important thing to me is can you use this to strengthen their balance sheet like you did a few years ago?” he said.
AMC raised $250 million in new equity in a sale that closed on Monday, coinciding with a renewed meme stock craze. The theater chain sold 72.5 million shares in a market share offering that began in late March. AMC sold the stock at an average price of $3.45 per share, before commissions and fees. Most of the shares are sold before the stock price rises.
“The recent surge in stock prices provides additional opportunities to raise equity funds that can support liquidity and reduce debt, ultimately enabling AMC moves toward structures that foster institutional support.
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