AMC Entertainment Holdings, Inc. has vaulted to a market value of $10 billion for the first time with shares rising 20% at 11:00 AM in New York and extending gains for four days due mostly to individual investors who are eager to save the movie theater industry after it recently raised over one billion dollars in financing by avoiding bankruptcy. The stock is up 1000% year-to-date because of this phenomenon.
AMC has doubled in value since Chief Executive Officer Adam Aron embraced the Reddit-fueled rally and talked to new retail investors on conference calls. The stock reached an all-time high of $22.97 Thursday, which stands out against a market value bottom of $216 million hit in April 2020 following AMC’s quarterly results report released May 6th. Chad Beynon, an analyst for Macquarie Securities who is waiting for AMC to continue shedding debt and lease obligations before getting more constructive with shares said “individual investors can create mania.”
“The Reddit crowd is strong, the volumes have been off the charts lately, so there’s clearly demand that wasn’t there pre-COVID,” he said by phone. The company’s ability to raise cash at over $10 a share earlier in the month “marked the first time the company was able to financially benefit from the Reddit rally,” he said.
AMC has raised a lot of cash through the sale of hundreds of millions more shares. This is one reason for their recent spike in market value despite actually going down over 35% from last year’s peak. There are currently 490 million AMC available, 10 times as many as there were at the start of 2017 – 52 million total.
About the More capital:
Faced with bankruptcy, AMC has been able to rebuild its business by cutting costs and refocusing on the production of hits such as “The Walking Dead.” The company’s bonds have rallied alongside shares in recent days. Just last month they were trading at a low of 5 cents but are now close to par following an uptick this week that extended gains from earlier in the week.
How will the company seek to raise more capital?
Some investors have suggested that they sell shares in order to pay down their debt load.
CEO Aron said on a call for fourth-quarter results, “we are focused on de-leveraging and carefully examining all financing opportunities” including the raising of additional capital “in whatever form we think is most attractive.”
AMC Entertainment has been on a surge recently with the help of individual investors. The $1 billion company added more than double its value to reach over $6 billion in recent days after three consecutive sessions, which is a significant improvement from their lackluster performance at the start of this year when they were worth just under half that amount. Analysts have pointed out that AMC’s financial success will depend largely upon whether it can post strong box office numbers as it reopens key markets like New York and California. B Riley Securities analyst Eric Wold downgraded shares for AMC stock Wednesday morning due to uncertainty about how well these theaters would do once reopened; he also noted concerns about competition among exhibitors with Carmike Cinemas’ planned acquisition by Cineworld Group.
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