Cars drive near an AMC theater in New York City on March 29, 2023.
Leonardo Muñoz | See Press | Corbis News | fake images
Can AMC Entertainment Take advantage of a second meme craze?
The action, together with Game stop, surged this week after “Roaring Kitty,” the man who inspired 2021’s huge short squeeze, posted online for the first time in nearly three years. He Roaring Kitty Returns, whose legal name is Keith Gill, has led AMC shares to more than double since Friday's close. They rose above $6 in afternoon trading on Tuesday.
The last time these retail investors supported AMC and its stock rose, the movie theater chain was able to avoid bankruptcy. Now you have the opportunity to make a dent in your significant debt load.
CEO Adam Aron made three major acquisitions “in a relatively short period of time” after taking over the company in 2015, which included the Carmike, Odeon and Nordic theater chains, said Eric Handler, CEO of Roth MKM. AMC spent about $3 billion on the deals together.
While the acquisitions bolstered the size of AMC's theater network, they also improved the company's bottom line, Handler said.
“So when the pandemic hit, they were hit with a double whammy because they were already highly leveraged and then they had to go into more debt to survive and give them more cash,” Handler said.
Since the beginning of 2022, AMC has paid off nearly $1 billion of its debt, but about $4.6 billion remains.
AMC has about $20 million due in 2024 and $118 million due in 2025, which is “not a hurdle,” according to Wedbush analyst Alicia Reese. But the impending $2.96 billion to be raised in 2026 requires the most attention.
“I think they'll be able to renegotiate some of it, but a lot of it will probably have extended maturities,” Reese told CNBC.
Lenders have been willing to renegotiate terms, but a rise in the stock price could allow AMC to get better deals.
AMC is currently paying about $100 million each quarter in interest expenses, which is hurting its potential earnings. While the box office is still recovering from pandemic-related production shutdowns and strikes, AMC has been unable to absorb its fixed expenses, such as rent, employee payroll and other operating costs, said Eric Wold, senior analyst at B .Riley Securities.
“What I care about is whether, like they did a few years ago, can they take advantage of this to strengthen their balance sheet?” he said.
AMC raised $250 million of new equity capital in a sale that concluded Monday, just as the meme stock craze revived. The movie theater chain sold 72.5 million shares in an on-market stock offering that began in late March. AMC sold the shares at an average price of $3.45 per share before commissions and fees. Most of the shares were sold before the stock price jump.
“The recent stock rally presents an additional opportunity to raise equity funds that can support liquidity and debt reduction, eventually moving AMC into a structure that could facilitate institutional support,” wrote analyst James Goss. from Barrington Research, in a note to investors. on Tuesday.
