Cars drive near the AMC Theater in Up-to-date York, March 29, 2023.
Leonardo Munoz | See the press | Corbis News | Getty Images
Power AMC Entertainment take advantage of the second meme craze?
Stock, next door Game stop, surged this week after “Roaring Kitty,” the man who inspired the massive brief squeeze of 2021, was posted online for the first time in nearly three years. The the return of the Roaring Cat, whose legal name is Keith Gill, has led AMC shares to more than double since Friday’s close. They rose above $6 on Tuesday afternoon.
The last time individual investors flocked to AMC and its shares soared, the movie theater chain avoided bankruptcy. Now it has a chance to reduce its significant debt.
CEO Adam Aron made three major acquisitions “in a relatively brief period of time” after taking over the company in 2015, which included the Carmike, Odeon and Nordic cinema chains, said Eric Handler, managing director of Roth MKM. AMC spent a total of about $3 billion on these deals.
Handler said the acquisitions increased the size of AMC’s theater chain but also improved 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 take on more debt to survive and give them more cash,” Handler said.
As of early 2022, AMC has paid off nearly $1 billion of its debt, but has about $4.6 billion remaining.
According to Wedbush analyst Alicia Reese, AMC is expected to pay around $20 million in 2024 and $118 million in 2025, which is “not a dealbreaker.” However, what needs the most attention is the upcoming $2.96 billion that needs to be raised in 2026.
“I think they will be able to renegotiate some of this deal, but most of it will probably have an extended maturity,” Reese told CNBC.
Lenders were willing to renegotiate terms, but an raise in the share price could allow AMC to strike better deals.
AMC currently pays about $100 million in interest each quarter, eating into its potential profits. As ticket sales continue to recover from pandemic-related production shutdowns and strikes, AMC has been unable to absorb its fixed expenses such as rent, employee wages and other operating costs, said Eric Wold, senior analyst at B. Riley Securities.
“What matters to me is, like a few years ago, can this be used to strengthen their balance sheet?” he said.
AMC raised $250 million in novel equity capital in a sale that closed Monday, just as the meme stock craze was resurging. The cinema chain sold 72.5 million shares as part of a market share offering that began at the end of March. AMC sold the stock at an average price of $3.45 per share before commissions and fees. Most of the shares were sold before the stock price surge.
“The recent rally in stock prices creates an additional opportunity to raise equity funds that can support liquidity and debt reduction, ultimately moving AMC into a structure that could facilitate institutional support,” Barrington Research analyst James Goss wrote in a note to investors on Tuesday.
