AMC Entertainment Increases Liquidity with Stock Offering
AMC Entertainment sells $325.5 million of stock to increase liquidity and address debt challenges. Analyst sees it as an opportunity. Categories: Finance, Entertainment, Business
AMC Entertainment Holdings, the movie-theater chain, has sold $325.5 million of stock in a recent move, increasing its near-term liquidity safety net, according to B. Riley analyst Eric Wold.
AMC has been working tirelessly to pay off its debt ever since it faced a challenging period of pandemic-related shutdowns. One of the strategies the company has utilized is selling its own stock. However, concerns about share dilution have led many AMC shareholders to question this method of raising capital.
In August 2022, AMC introduced approximately 517 million preferred equity units (APEs) for trading on the New York Stock Exchange. In August 2023, the company completed a 1-for-10 reverse stock split, effectively reducing the number of outstanding shares. Each APE unit was then converted into one post-split AMC share.
On Wednesday, AMC successfully completed its at-the-market (ATM) equity offering. The offering raised approximately $325.5 million in new equity capital by selling 40 million shares at an average price of around $8.14 each.
The company expressed its satisfaction with the completion of the ATM equity offering and stated that it significantly enhances AMC's cash reserves, tackles ongoing liquidity concerns, and strengthens its balance sheet.
B. Riley analyst Eric Wold views this development as a positive move for AMC. In a research note, he emphasized that the proceeds from the stock offering not only provide an increased near-term liquidity safety net amidst potential Hollywood strikes that could disrupt the 2024 film slate but also present an opportunity for AMC to reduce principal balances on higher interest rate debt due in 2026 and beyond.
Wold maintains a Neutral rating on AMC stock with a price target of $45. He suggests that management should continue using equity sales to pay off debt, especially considering the uncertainty surrounding the Hollywood strike and its potential impact on the movie industry. However, once the strike concludes, Wold believes AMC can deploy the cash to acquire new movie theaters and diversify its growth strategies.
AMC shares enjoyed a 5.9% rise on Thursday, reaching $8.74.