Meme-stock darling AMC Entertainment took a nosedive on Thursday after the world’s largest cinema chain announced plans to raise $110 million in new capital and proposed a reverse stock split.
AMC shares plunged nearly 15% in morning trade as the stock hit a fresh 52-week low of $4.11. It closed at $4.91, down 7.4%.
The steep decline came after the company announced it would raise new equity by selling units of APE — a form of preferred stock, referring to the nickname “Apes” adopted by meme-stock investors — to Antara Capital at a weighted average price to procure from 66 cents per share.
Antara, a current holder of AMC debt, will also swap $100 million of debt for approximately 91 million APE units, which would reduce AMC’s annual interest expense by approximately $10 million.
AMC CEO Adam Aron also announced that the Company intends to hold a meeting of APE and AMC shareholders to vote on the conversion of APE units into AMC shares, proposing a reverse split at a ratio of 1: 10 before.
“Given the consistent trading discount we routinely see in the price of APE units relative to AMC common stock, we believe it is in our shareholders’ best interests to simplify our capital structure,” said Aron.
The cinema giant has been working to reduce its high debt burden, which had grown after its doors closed in the early days of the pandemic. It’s also about stock dilution and a film release schedule that’s short on blockbusters.
Last month, AMC reported a quarterly loss of $226.9 million despite reporting higher revenue compared to the year-ago period, weighed down by higher operating expenses.
In the third quarter, $179 million in cash was burned as it focused on upgrading cinema screens and adding more Imax and Dolby Cinema screens to its portfolio.
AMC’s proposal to raise capital and split its shares comes a day after it announced it was no longer in talks to buy theaters from rival Cineworld, which owns the Regal chain. Cineworld filed for bankruptcy earlier this year.
AMC, too, was on the brink of bankruptcy in 2021 but averted disaster after millions of small investors turned it into what they called “meme stock” — with the stock soaring to nearly $60 over the past year.
Aron has since hatched several schemes to raise more capital and reduce its debt as it invests more in improving its theaters.
In August, AMC announced APE as a special dividend for shareholders and as a means of raising capital going forward.
“They’ve taken on a lot of debt and that’s the only way they can survive,” Thomas Hayes, chairman and managing director of Great Hill Capital, told Reuters. “They’re going to have to keep raising capital to service all that debt to survive and it’s not looking too promising.”
Aron said AMC paid off about $180 million in debt in 2022.
At the end of September, AMC’s debt totaled $11.79 billion, including $5.2 billion in corporate bonds. Cash and cash equivalents were $684.6 million, down from $1.59 billion a year ago.
Headquartered in Leawood, Kansas, the company operates over 900 theaters worldwide and has a market capitalization of $2.74 billion.
https://nypost.com/2022/12/22/amc-entertainment-to-raise-110m-proposes-reverse-stock-split/ AMC Entertainment Shares Tank After Unveiling $110M Plan