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AMC Poised to Cash in on Meme Stock Traders, Sending Stocks Higher
(Bloomberg) — Retail traders flocking to AMC Entertainment Holdings Inc. in hopes of burning short sellers may also be helping the company shore up its finances.
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That’s because the beleaguered movie theater chain, which rose 78% on Monday amid the meme stock frenzy, has a fundraising arrangement known as a market offering that allows it to opportunistically create new shares to sell the buyers on the open market. The deal is part of AMC’s long-term effort to secure the capital needed to execute its recovery, even if it means diluting investors looking to profit from short-term recoveries.
“You would be crazy not to sell shares for this ridiculousness if you run the company,” said Tuttle Capital Management CEO Matthew Tuttle.
As of May 8, the company could raise about $125 million in additional cash through the program, meaning it could sell about 24 million shares based on Monday’s $5.19 close. fair.
The financing deal has already generated $124 million, before commissions and fees, through the sale of 38.5 million shares of common stock after being announced in March. That would indicate an average price of $3.22, a drop of more than 90% from where shares were trading just a year ago.
While the dilution hit the same investors who boosted the stock, it’s nothing new for AMC or the meme stock group. Over the past four years, the company has announced at least five stock offerings, data compiled by Bloomberg shows, selling millions of shares in the process.
Navigating a massive $4.5 billion in debt has been a priority for AMC management, something the stock sales aim to address. The company had US$624 million in cash and equivalents at the end of March, after losing almost US$165 million in the quarter, according to a document presented last week.
The earnings “may do little to calm concerns surrounding the theater chain’s structural issues,” Bloomberg Intelligence analysts Geetha Ranganathan and Kevin Near wrote on Monday.
Even after the stock’s rally on Monday, it remains 99% below its June 2021 closing high.
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