AMC Entertainment shares tank after unveiling $110M plan

Meme-stock darling AMC Entertainment saw its share price nosedive Thursday after the world’s largest movie theater chain announced plans to raise $110 million in new capital and proposed a reverse stock split.

AMC shares plunged nearly 15% in midmorning trading as the stock hit a new 52-week low of $4.11. It closed at $4.91, down 7.4%.

The precipitous drop came after the company said it plans to raise new equity through a sale of APE units – a form of preferred shares referring to the “Apes” moniker adopted by meme-stock investors – to Antara Capital at a weighted average price of 66 cents a share.

Antara, a current AMC debt holder, will also exchange $100 million in debt for about 91 million APE units, which would reduce AMC’s annual interest expense by about $10 million.

AMC CEO Adam Aron also announced the company is looking to hold a meeting of APE and AMC shareholders to vote on converting APE Units into AMC shares, proposing a reverse-split at a 1:10 ratio.

“Given the consistent trading discount that we are routinely seeing in the price of APE units compared to AMC common shares, we believe it is in the best interests of our shareholders for us to simplify our capital structure,” Aron said.

The movie theater giant has been working to lighten its heavy debt load, which grew during the early days of the pandemic after its doors were shuttered. It is also dealing with stock dilution and a film release schedule that is short on blockbusters. 

Last month, AMC reported a quarterly loss of $226.9 million even as it recorded higher revenue compared to the year-ago period, which was burdened by higher operational costs.

During the third quarter, it said it burned through $179 million in cash as it focused on upgrading movie screens and adding more Imax and Dolby Cinema screens across its portfolio.

AMC’s capital raise and reverse stock split proposal comes a day after it said it is no longer in talks to buy theaters from rival Cineworld, which owns the Regal chain. Cineworld filed for bankruptcy earlier this year. 

AMC, too, had been on the verge of bankruptcy in 2021, but was able to avert disaster after millions of retail investors turned it into a so-called “meme stock” — with the stock soaring to nearly $60 last year.

Aron has since cooked up several plans to raise more capital and reduce its debt as it invested more in improving its theaters. 

In August, AMC announced APE as a special dividend for shareholders and a means to raise capital in the future. 

“They’ve taken on a lot of debt and it’s the only way to survive,” Thomas Hayes, chairman and managing member of Great Hill Capital told Reuters. “They’re going to have to continue to raise capital to service all this debt to survive and it doesn’t look that promising.”

Aron said AMC had cleared about $180 million of debt in 2022.

At the end of September, AMC’s liabilities totalled $11.79 billion, which included corporate borrowing of $5.2 billion. Cash and cash equivalents were at $684.6 million, a fall from $1.59 billion a year ago.

The Leawood, Kans.-headquartered firm, which operates over 900 theaters globally, has a market capitalization of $2.74 billion.