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Trading in shares of AMC Entertainment Holdings was restricted yesterday across multiple trading platforms, but the company used its sudden popularity this week to give itself an additional financial boost and be better prepared for a pickup in consumer spending. in the USA.
The multinational theater company has had a difficult year due to the coronavirus pandemic. Some films have debuted from its more than 1,000 theaters to streaming platforms like Netflix and HBO. Others have postponed their premieres. AMC suspended US operations between March and August, then limited reception capacity after some of its theaters reopened. In its most recent quarter ending Sept. 30, revenue had fallen more than 90% to $ 119.5 million from $ 1.3 billion; and its net loss skyrocketed to $ 905.8 million, an 851 percent increase over the same period in 2019. Its dismal financial performance was why AMC became one of the most shorted companies in the United States. United.
But earlier this week, AMC President and CEO Adam Aron said, “Any discussion of impending bankruptcy for AMC is completely irrelevant.”
A few things made this sunny view possible. After AMC was highlighted by a stock market-focused Reddit forum, its stock price rose 300% on January 27. On January 28, many retail brokers restricted trading in AMC stocks. Robinhood and E * Trade trading platforms temporarily restricted AMC trading yesterday; while Charles Schwab and TD Ameritrade have added requirements on certain trading options.
With a market value of nearly $ 3 billion today, AMC and the holders of its debt benefited from the rise in the share price this week. On January 25, the company announced that it had raised $ 506 million in equity and $ 411 million in additional debt. This additional liquidity “should get the company through this dark coronavirus-hit winter,” AMC said. On the same day, he launched a new offering to sell up to an additional 50 million shares.
After two days, AMC announced that it had sold all the new shares, plus 13.3 million more shares from a previously announced share sale. The proceeds totaled $ 304.8 million.
On top of that, a group of lenders decided to swap $ 600 million in loans for shares in the company. For AMC, that means more interest and more payments. For Silver Lake, the private equity firm and the main lender, that means there are no more concerns about AMC’s repayment capacity, just AMC’s share price, which if the Redditors have something to do with this, will continue to increase.
Five days ago, AMC’s operational concerns were serious enough to warn investors that it may not exist any longer. Now that its financial trail has been extended by over $ 1 billion, AMC may take longer to negotiate with theater owners over how it will pay past and future lease payments; and with the studios on the release of films.
Even with recent interest in investing, experts still wonder if AMC’s business model can ever return to pre-pandemic levels of success. “For companies like AMC that rely on people being many and close to each other, I think this will remain a difficult proposition for some time for the foreseeable future,” said Yung-Yu Ma, strategist in Chief Investment Officer at BMO Wealth Management.
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