AMC CEO on $230M cash raise: ‘time for AMC to go on the offense again’

By: Ajay Pal Singh
Ajay Pal Singh
Ajay worked at Tata Motors in project planning before discovering his passion for stocks. Today, he lives in Canada… read more.
on Jun 1, 2021
  • AMC has agreed to sell 8.5 million of its shares to Mudrick Capital Management for $230.5 million in cash.
  • Proceeds will be used for acquisition of additional theatres, enhancing existing theatres and deleveraging.
  • Sara Fischer of Axios says the CEO should focus on getting the fundamentals in order.

AMC Entertainment Holdings Inc. (NYSE: AMC) has agreed to sell 8.5 million shares of AMC’s Class A Common stock to Mudrick Capital Management L.P. for $230.5 million in cash. This implies a per-share price of approximately $27.12 for the deal.

Shares of AMC are currently priced at around $31 in pre-market trading, up by 20% from yesterday’s close. AMC has been fueled by Reddit board WallStreetBets in the recent weeks as it has surged 169% over the past month and 113% over the past five days.

What will the money be used for?

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The proceeds from the sale of shares will be used for pursuing the acquisition of additional theatres and enhancing the customer experiences in its existing theatres. In addition, the funds will also be used for deleveraging the balance sheet. 

According to the press release, the company is currently engaged in discussions with landlords of theatres that were previously operated by Arclight Cinemas and Pacific Theatres.

What did the management say?

Expanding on the impact of the share issuance on the existing shareholders, AMC CEO and President Adam Aron said:

“Given that AMC is raising hundreds of millions of dollars, this is an extremely positive result for our shareholders. It was achieved through the issuance of only 8.5 million shares, representing less than 1.7% of our issued share capital and only a small portion of our typical daily trading volume. This transaction underscores the real value of having some authorized share capital available for us to opportunistically capitalize on shareholder value creation possibilities as and when they arise.”

With wider vaccine rollouts and easing of lockdown measures, the company expects to start performing well again. Aron further added:

“With our increased liquidity, an increasingly vaccinated population and the imminent release of blockbuster new movie titles, it is time for AMC to go on the offense again.”

CEO needs to focus on getting the fundamentals in order

Sara Fischer, a media reporter at Axios, said on CNBC that she does not expect the theatre attendance to bounce back to pre-pandemic levels. The current surge in AMC is not based on fundamentals and the CEO should focus on improving the revenues and getting his fundamentals in order.

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