AMC movie theatre
Scott Millian | CNBC
AMC EntertainmentThe company’s stock fell rapidly on Thursday after the company announced a new $110 million capital increase and a proposed reverse stock split that would require shareholder approval.
Stocks paused briefly after the opening bell as AMC hit a 52-week low. The stock fell 15% in mid-morning trading.
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The company said it plans to raise the new shares by selling them monkey The units—a form of preferred stock that references the “Apes” moniker approved by meme stock investors—to Antara Capital LP at a weighted average price of 66 cents per share. On Wednesday, the closing price of APE was 68.5 cents. The company said this reduces its debt burden by $100 million.
“It is clear that having APEs was serving exactly the purposes for which they were intended. They allowed AMC to raise a lot of welcome cash, reduce debt, and in doing so reduce our balance sheet and allow us to explore what is possible.” [mergers and acquisition] CEO Adam Aron said in a press release Thursday.
In addition, AMC is proposing a reverse stock split of AMC common stock at a ratio of 1 to 10. The Company requests a special meeting of shareholders to approve the reverse stock split, converting the APE units into AMC common stock.
The world’s largest movie theater chain is working to relieve a heavy debt burden, which grew during the early days of the Covid pandemic when theaters were closed, and has also dealt with inventory relief and a short film release schedule in blockbusters.
In November, the company reported another quarterly loss despite reporting higher revenues compared to the previous year due to higher operating costs. Despite having a significant amount of cash on its balance sheet, AMC spends more than it makes each quarter on operations such as franchise and movie exhibition costs, in addition to rent.
During the third quarter, AMC said it spent $179 million in cash.
However, the company said it is focusing on theater investments, such as upgrading movie screens and increasing the number of special effects screens such as Imax and Dolby Cinema, across its footprint.
The capital raise and proposed reverse stock split come a day after AMC announced it was no longer in talks to buy theaters from Regal parent Cineworld, which filed for bankruptcy earlier this year. In a securities filing, AMC said discussions with Cineworld’s lenders regarding assets in the United States and Europe have concluded.
AMC itself was on the verge of bankruptcy in 2021, but was able to avoid it after millions of retail investors converted its shares into M shares. The company has since put in place several plans to raise more capital to reduce its debt and invest in its acquisitions and theaters.
Read the full statement from AMC here.