AMC Faces Challenges as Shares Plummet

Shares of movie theater chain AMC (ticker: AMC) plunged 14% on Thursday following the announcement of a new stock offering worth up to $350 million, leading to a decline of 76% for the year. This marks the worst year in the company's history.

To alleviate its debt burden, AMC has been actively selling stock, a strategy that has had mixed results. Analyst Alicia Reese from Wedbush commented on the situation, expressing concern about the company's balance sheet and the potential negative impact of diluting its share base. Reese maintains a Neutral rating and a $11 price target for the stock. However, she also noted that if AMC successfully reduces its debt and industry conditions improve, it may be able to resume dividend payments and consider repurchasing shares.

AMC's strategy focuses on securing shareholder support by issuing shares only when necessary or when shares are trading at high levels. Their aim is to regain stability in their financials while retaining the backing of retail shareholders.

Despite the challenging market conditions, AMC reported better-than-expected third-quarter financial results, driven by the success of movies like "Barbie" and "Oppenheimer." Looking ahead, the company anticipates the lingering effects of recent writers and actors strikes, although these strikes have ended. On a positive note, AMC has experienced strong viewership for "Taylor Swift: The Eras Tour" and is optimistic about the upcoming release of "Renaissance: A Film by Beyoncé."

While domestic audiences have declined by 16% since 2019, AMC has managed to increase concession sales revenue by 30% per patron.

AMC did not provide immediate comment following a request for further information.

AMC's Post-Pandemic Recovery Journey

These results reflect AMC's promising growth path to recovery in the post-pandemic era. AMC Theatres, a well-known cinema chain, faced significant challenges during the pandemic. With enforced lockdowns and widespread concerns about contracting Covid-19, the company teetered on the brink of permanent closure. Compounding these issues was AMC's pre-pandemic accumulation of debt due to its acquisition of smaller cinema chains and investments in theater improvements.

During this tumultuous time, meme traders emerged in January 2021, rallying behind the AMC stock to squeeze institutional short sellers. Eventually, on June 2, 2021, AMC reached its highest recorded closing price.

CEO Adam Aron has staunchly supported the meme trade from its inception. In August 2022, as part of their debt repayment strategy, the company introduced about 517 million preferred equity units (APEs) for trading on the New York Stock Exchange. The naming of these units as APEs paid tribute to the retail investors who displayed significant interest in AMC's stock.

Over time, these APE units were converted into AMC stock, with each APE representing 1/10 of one AMC share. This conversion allowed the company to sell additional stock and generate funds to tackle its debts.

However, AMC's recent financial results have been overshadowed by its association with the meme trade. Investors disappointed by the dilution of their shares have hindered the stock's full potential. Therefore, despite positive financial performance reported on Wednesday, Thursday's market sentiment remained unimpressed.

We continue to monitor AMC's journey towards recovery in the post-pandemic landscape.