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- AMC shares at 52-week low; APE not faring well either
- Investors are concerned about ownership dilution and business strategy
- AMC has enough cash to outlast the coming months with only 4 mega flicks scheduled.
APEs and huge debts
AMC stock hit a 52-week low as debt load rose significantly; no mega flicks are planned for the season and stock dilution. The stock dropped by 80% in the past 12 months to $6 (at the time of writing). Investors have been raising questions regarding the movie theater company’s business strategy.
This August, AMC distributed its AMC Preferred Equity or popularly known as “APE” as dividends to its AMC shareholders. According to its filings, it was authorized to sell 1 billion APE shares; however, it distributed just over a half of the entire lot as dividends to existing shareholders.
APE was created as part of CEO Adam Aaron’s aggressive marketing tactics to attract retail investors – specifically those who call themselves “Apes.” Nevertheless, APE is just another financial instrument to raise cash fast.
APE units can be converted to AMC shares. Since APE is a preferred equity, its holders will get paid before AMC holders in the event of a bankruptcy filing. Before the APE launch, AMC holders had rejected a bid to sell more shares fearing the dilution of their already strained profits. While this can raise liquidity for the struggling theater chain, fears of dilution have clearly materialized.
The world’s largest theater chain struggled during the pandemic. AMC sold 500 million shares over the outstanding 100 million when its stock price began rising in late 2020.
At the height of the pandemic, AMC acquired a number of smaller theater chains and invested in their modification per their requirements. AMC’s debt is $5 billion of which is $2 billion more than its market cap.
Only 4 blockbusters slated to release before 2023
As per CNBC, more people are visiting theaters than last year and earlier this year. Only 22 movies were released this summer, which is 47.6% lower than 2019. Between January and August of 2019, with 75 releases, the box office was $7.7 billion; while in 2022, collections stood at $5.3 billion.
Later this year, the following big ticket movies will be released: “Black Adam” (October 21), and Disney’s “Black Panther: Wakanda Forever” (November 11), “Strange World” (November 23) and “Avatar: The Way of Water” (December 16.).
Nearly 24 blockbusters were scheduled in the last four months of 2019. According to Eric Wold, senior analyst at B. Riley Securities the estimated value of total ticket sales in 2023 is $9.5 billion. For reference, the 2019 box office collection was $11.4 billion.
“I think the outlook is positive for AMC with the potential to return to pre-pandemic box office by 2024,” Wold added, per CNBC.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
