Will 50 Million More New Shares Save AMC?

Since early November, AMC Entertainment Holdings Inc. (NYSE: AMC) has registered 270 million new shares for sale at market prices. The first of these filings, on November 2, included 20 million shares at a reference price of $2.39 per share. The second, on December 11, registered 200 million shares at a reference price of $4.09.

On Tuesday, the company filed to register a third sale of 50 million shares at a reference price of $2.39. Shares dropped around 5% Wednesday morning to trade at around $2.15, in a 52-week range of $1.95 to $7.78 per share.

The COVID-19 pandemic has hit movie theaters and performance venues especially hard. Lockdowns essentially closed these spaces and movie-goers and concert-goers have stayed away, even as theaters reopened with limited seating.

AMC is raising cash to help meet its ongoing expenses, like debt service and lease payments. It may not be possible though for the company to raise liquidity fast enough to stop the bleeding.

On December 14, the company said it had secured a $100 million note from Mudrick Capital Management that will meet AMC’s cash needs through January. AMC noted that it will need an additional $750 million in cash to remain open through all of 2021.

In an explanatory note in Tuesday’s filing, AMC noted that of the 200 million shares it had registered a few weeks earlier, it had sold just over 38 million, in addition to about 22 million in secondary sales following a private placement. The company said that as of Monday, the sale of the 38 million shares had raised $104.2 million at an average price per share of $2.81.

Compounding the issues AMC and other theater operators face is the recent decision by AT&T’s WarnerMedia to release all 17 of its planned 2021 movies simultaneously on HBO Max and in theaters. Disney’s streaming service, Disney+, with more than 70 million subscribers since its introduction late last year, is virtually certain to follow WarnerMedia’s lead.

Last weekend’s U.S. opening of “Wonder Woman 1984” grossed $16.7 million in 2,100 theaters while premiering simultaneously on HBO Max. Since the pandemic hit the United States in March, that’s the highest-grossing opening weekend of the year. In 2017, the opening weekend of the prior “Wonder Woman” grossed more than $100 million at 4,100 theaters.

The availability of vaccines to stop the spread of COVID-19 will help get theaters open again, but given that people under the age of 25 comprise about a quarter of theater audiences and will be among the last to receive the vaccines, relief for the theater industry is probably at least six months off. AMC appears to have little chance of making it that far. Even if it does, how will the simultaneous release of new movies affect the size of its audiences in the second half of next year?

AMC shares traded down more than 6% to $2.15 on Wednesday, exactly matching its consensus price target. At its intraday low, the stock traded at $2.13.

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