AMC Entertainment Makes $ 900 Million Mistake

In theory, it doesn’t matter how or why AMC Entertainment Holdings (NYSE: AMC) finally got its double-digit stock for the first time in over a year on Wednesday. The multiplex operator had raised more than $ 1.9 billion since April last year, and a bull share price would be the perfect opportunity to raise some more cash at pre-pandemic prices.

It didn’t work that way. AMC said on Wednesday that it had sold 63.3 million shares as part of its share program in the market. The problem is, it pushed the freshly printed stocks to an average price of $ 4.81 a share on Monday. He raised $ 304.8 million in the process. Had the nation’s largest movie theater chain timed its sale of shares heading into Wednesday’s close, those same 63.3 million shares could have raised more than $ 1.2 billion. sometimes 48 hours is more than just an Eddie Murphy and Nick Nolte movie. Sometimes not waiting 48 hours can be a $ 900 million mistake.

Image source: Getty Images.

Let’s get real

The good news here is that AMC felt it had enough cash ahead of Monday’s stock sale to move further into 2021. It would need a few things to get right, including its forecast for market levels. future attendance to be maintained and an intensified vaccination process. Adding over $ 300 million in new money to this pot gives it more wiggle room if media actions push back more theatrical releases, customers don’t come back right away, or vaccines make the taste of pop hate. buttered corn.

Monday also should not be the last time AMC exploits the stock markets for more concessions. It wouldn’t be a bad idea to raise as much money as possible with his double-digit stock. He may as well enjoy the binge eating.

Most investments take a hit after selling stocks. It is a dilutive gesture. But that doesn’t necessarily apply to this particular mania. The action will likely revert to single digits when speculators move on, regardless of how many more shares are printed now. Unless there is a drastic change in fundamentals at AMC, stocks eventually come down. Raising money doesn’t improve fundamentals. Incremental liquidity saves AMC more time, but does not give it more power.

Just nine months ago, AMC was so powerful that it threatened a studio to ban future movies from its screens. The studio had simply discussed the possibility of releasing films digitally at the same time as theaters in the future. Now Warner Bros. puts each theatrical release on HBO Max at the same time as its box office premiere. AMC and its small peers no longer have the same type of leverage as they once did.

What are you waiting for AMC? Do you want to make another $ 900 mistake? Of course not.