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AMC Entertainment Makes a $900 Million Mistake

By Rick Munarriz - Jan 28, 2021 at 9:25AM

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The multiplex operator sells stock this week, but unfortunately it's at less than a quarter of Wednesday's close.

In theory it shouldn't matter how or why AMC Entertainment Holdings (AMC -8.03%) finally got its stock into double digits for the first time in more than a year on Wednesday. The multiplex operator had raised more than $1.9 billion since April of last year, and a buoyant share price would be the ideal opportunity to raise some more liquidity at pre-pandemic price points.

It didn't work out that way. AMC announced on Wednesday that it sold 63.3 million shares as part of its at-the-market equity program. The problem is that it pushed out the freshly printed shares on Monday at an average price of $4.81 a share. It raised $304.8 million in the process. If the country's largest movie theater chain had timed its stock sale near the close of Wednesday's trading those same 63.3 million shares could've raised more than $1.2 billion. Sometimes 48 Hrs. is more than just an Eddie Murphy and Nick Nolte flick. Sometimes not waiting 48 hours can be a $900 million mistake. 

A popcorn box spilling over and a film slate.

Image source: Getty Images.

Let's get reel

The good news here is AMC felt that it had enough liquidity before Monday's stock sale to go deep into 2021. It would need a few things to go right, including its forecast for future attendance levels to hold up and a stepped-up vaccination process. Adding more than $300 million in new money into that pot gives it more wiggle room if media stocks push back more theatrical releases, customers don't come back right away, or the vaccines make recipients hate the taste of buttered popcorn. 

Monday also doesn't have to be the last time that AMC taps the equity markets for some more concessions stand money. It wouldn't be a bad idea to raise as much money as it can now with its stock in the double digits. It may as well cash in on the feeding frenzy.

Most investments take a hit after selling stock. It's a dilutive move. But that doesn't necessarily apply to this particular mania. The stock will likely fall back to the single digits when the speculators move on no matter how many additional shares it prints out now. Unless there's a dramatic shift in the fundamentals at AMC the shares are going back down eventually. Raising money doesn't improve the fundamentals. Incremental liquidity buys AMC more time, but it doesn't yield it more power. 

Just nine months ago AMC was so powerful that it was threatening a studio with banning future films from its screens. The studio had simply mentioned the possibility of releasing movies digitally at the same time as theaters in the future. Now Warner Bros. is putting every theatrical release on HBO Max at the same time as its box office premiere. AMC and its smaller peers no longer have the same kind of leverage they once did.

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

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