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Dalian Wanda, who acquired AMC Entertainment in 2012, ceded control of the struggling exhibitor as it issued and sold tranches of new shares to raise cash – diluting the Chinese conglomerate’s stake.
CEO Adam Aron has confirmed that the Wanda era is over, although the company continues to be AMC’s largest shareholder. Wanda owns less than 10% of the world’s largest movie theater chain. “They were absolutely delicious,” he said on a conference call Wednesday after the results. “From now on, AMC will be governed like most other publicly traded companies with a wide range of shareholders.”
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Aron touched on the stock Reddit rally, the Silver Lake exit, ongoing negotiations with owners and AMC’s cash position.
Most of AMC’s revenue disappeared last year, and it lost nearly $ 1 billion in the fourth quarter and $ 4.6 billion for all of 2019.
Wanda had acquired AMC’s super high-voting class B shares which have three votes per share, making him the controlling shareholder as long as his economic interest remained above 30%. But Wanda converted the B shares into Class A common stock, with one vote each. New shares issued by AMC to raise funds during the pandemic have diluted Wanda’s stake well below that 30% threshold.
Wanda has two directors on the AMC board, Lin Zhang and Zeng Maojun.
Large investment firm Silver Lake Partners, which provided AMC with an injection of liquidity in 2018 by acquiring $ 600 million in AMC convertible bonds, cashed. Taking advantage of a Reddit-fueled AMC stock rally in January, Silver Lake converted its debt to equity, getting 44 million shares at $ 14 each, then selling them for $ 713 million.
This removed $ 600 million in interest-bearing debt from AMC’s books. Aron said that “the relationship is very important to us” and he hopes that Silver Lake representative on AMC’s board of directors, General Manager Lee Wittlinger, “will continue to serve for a long time.”
On Reddit, Aron only said, “I really took one thing to heart. How 101-year-old AMC is a crucial part of the American zeitgeist. “
Retail traders on the Reddit Wall Street Bets chat have rocked financial markets from late last year suddenly pouring into a handful of falling and breaking stocks led by GameStop and AMC. Shares in the exhibit, which had cost less than two dollars at one point last year, climbed to more than $ 20. The impact has persisted. The stock closed at around $ 10 on Thursday.
Aron noted that 99% of the cash raised by AMC came “before Reddit”.
The company has $ 1 billion in cash on its books – enough to run it through 2021 if there’s even any semblance of a recovery. He has taken a hiatus since January to raise capital, but remains focused on strengthening his liquidity position and paying down debt, he said.
He thanked the owners for deferring the rent last year. CFO Sean Sullivan said part of the deferred rent was due in the first quarter, but discussions are underway for additional concessions. He said the AMC closed 60 theaters last year – 48 in the United States and 12 overseas.
Aron said the owners wanted to stay in business with AMC. The chain will continue to build and rent theaters, but in the new transactions the owners will take on more risk than in the past.
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