AMC shares hit 52-week low as recent moves and gimmicks fail to win over investors

A pay freeze for the branded credit card and its CEO has done little to assuage amc entertainment Shareholders’ concerns mount as the movie theater chain’s stock hit a 52-week low on Wednesday.

Shares of AMC, which have fallen more than 85% so far this year, closed Wednesday at $3.84 per share. The stock drop comes as the company lays out several plans raise more capital to pay down your debtand invest in acquisitions and theater upgrades.

While the company was able to come back from the brink of bankruptcy in 2021 thanks to millions of retail investors who converted their shares into meme stock, it has struggled to maintain momentum in 2022.

Concerns about AMC’s massive debt load, which accumulated before the pandemic, have resurfaced as the company looks to dilute its stock and compete with the slow-recovering film industry. Company additions including popcorn business and a gold minehave failed to move the needle as the stock price continues to decline.

For several quarters, AMC’s revenue has not been enough to cover its costs. Much of this is due to a thin slate of Hollywood movies, a result of production delays due to the pandemic and low ticket sales.

There is no doubt that the domestic and global box office will recover more strongly in 2023 as more films are released to the public. However, moviegoing may not return to pre-pandemic levels until 2024 or 2025, if at all, analysts warn.

Where AMC’s trouble lies is in its fundamentals, says MKM Partners media and entertainment analyst Eric Handler.

He added that the recent APE stock issuance and previous stock sales allowed AMC to pay down more than $5 billion in debt, but the company’s overall valuation has not changed.

“It’s a negligible effect on valuation,” Handler said. “Credit cards are a nice little thing. Popcorn deals are a nice little thing. All those things are low risk and helpful to the business.”

But, he added, things are not that great when you look at the capital structure of the AMC – its large number of outstanding shares, combined with its high debt levels.

“The shares don’t have much equity value. And it’s still trading at valuations significantly higher than where theater operators traditionally trade,” he said. “At some point the fundamentals matter.”

AMC did not immediately respond to a request for comment.

AMC’s latest attempt to right the ship is an equity deal with Antara Capital, one of the company’s major debt holders, that allows Antara to raise $110 million through the sale of its APE units for 66 cents apiece. is for Antara will also exchange AMC notes worth $100 million for 91 million APE units, Which will reduce AMC’s annual interest expense by about $10 million.

“Clearly, APE’s existence is achieving its intended objectives,” CEO Adam Aron said in a statement last week. “They have allowed AMC to raise much welcome cash, reduce debt and in doing so reduce our balance sheet and allow us to explore potential M&A activity.”

“However, given the consistent trading discount regularly observed in the price of APE units relative to AMC common shares, we believe it is in the best interest of our shareholders to simplify our capital structure, thereby The exemption has been implemented on APE units in the market to be phased out,” he said.

The company’s board announced last week that it intends to hold a special meeting of shareholders to vote on proposals, including seeking permission to implement a reverse stock split of AMC common shares.

AMC declined to comment further when contacted by CNBC.

“The steps they’re taking right now, in terms of converting APEs to AMCs, if that goes through, and then doing the reverse stock split, if that goes through, that will put them where they were in 2019.” , leads back there.” Alicia Reese, an analyst at Wedbush.

Essentially, the AMC wants to offer its shareholders one share for every 10 shares held, converting the individual stock price from as little as $4 to as much as $40.

This new valuation doesn’t make much sense to many analysts, who note that AMC may have more cash than it did in 2019, but it still has a similar debt load and no dividend.

“It doesn’t work,” said Reese. “All this is saying right now is that the shares are still overvalued. And they still have a lot to lose.”