AMC makes hay while stock soars

IFR 2386 - 05 Jun 2021 - 11 Jun 2021
4 min read
Anthony Hughes

AMC Entertainment has fully embraced its status as US retail investors' favourite "meme stock" and short squeeze target by raising US$587.4m from an at-the-market offering to accelerate the repair of the company's pandemic-bruised finances.

The world's largest cinema chain has gone from the brink of bankruptcy last year as Covid-19 emptied its theatres to now carrying high levels of liquidity thanks to a relentless series of equity offerings that have increased its share count fivefold in the past year.

Though at odds with any conventional investing logic, AMC's share price has been rising even faster, surging 2,300% this year by Thursday's close.

The stock nearly doubled in Wednesday's session alone as a social media-driven short squeeze and heavy options trading drove the price beyond any sensible reading of the fundamentals.

On Thursday, AMC's sales agents B Riley Securities and Citigroup launched and within hours completed the dribble-out sale of 11.5m new shares at an average price of US$50.85 per share. It was the company's biggest equity offering since the pandemic struck.

The ATM proceeds add to US$658.4m already raised this quarter from an earlier ATM and a US$230.5m private share sale to hedge fund Mudrick Capital Management earlier in the week, though both were struck at much lower prices.

AMC also completed four smaller ATMs last year and another earlier this year, helping to bolster its liquidity and bring down its net debt from about US$5bn in the middle of the Covid lockdowns last year to an estimated US$3.5bn.

A filing alongside the latest ATM warned investors that the stock had experienced and might continue to experience “extreme volatility” unrelated to its underlying business and that this could result in substantial losses for investors.

AMC said last month its attendance figures in the first quarter of 2021 were still down nearly 90% versus the same period last year, while it also burned US$120m of cash a month during the period.

Still, the company was able to issue fresh equity with ease on Thursday in a session that saw nearly 600m shares change hands (typically ATM issuance is limited to less than 10% of daily volume though in this case the 11.55m shares were well below that threshold).

Massive volumes also enabled China's Wanda Group, which took AMC public on the NYSE in 2013, to last month sell its remaining stake through on-market trades.


“With our increased liquidity, an increasingly vaccinated population and the imminent release of blockbuster new movie titles, it is time for AMC to go on the offense again," AMC CEO Adam Aron said in a statement.

AMC also said late on Thursday it was seeking shareholder approval to increase its authorised shares by 25m after its heavy stock issuance in the past year lifted its share count to more than 500m from 100m before the pandemic, leaving it unable to issue any significant number of additional shares.

AMC also said it had no plans to split its stock (which would not raise any capital) and conceded "considerable trading in derivatives on the company’s stock, including both put and call options" may have increased the volatility of its share price.

Shareholders will vote on the proposal at the end of next month after AMC earlier postponed its annual meeting scheduled for early May because it failed to get enough support for its plans for a larger increase and to "provide additional time for its millions of current individual shareholders to have their voices heard and more time to cast ballots on important shareholder matters".

Aron said in a YouTube interview on Thursday: “If we are not armed with this tool [the ability to issue new stock] then you’re tying our hands behind our back and you’ll make it just that much harder for us to land some of these attractive opportunities that could benefit us all.”

In a whirlwind week of news from the company, it also said it would cater to its now huge base of at least 3.2 million retail shareholders with special offers, starting with free (large) popcorn if they visit one of the cinemas in the summer.

AMC graphic