Can AMC Dilute Shareholders Enough to Stay Viable?

By Jon C. Ogg Published Nov 2, 12:59PM EST

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

Can AMC Dilute Shareholders Enough to Stay Viable? — © Photo by Bruce Bennett / Getty Images News via Getty Images

One of the biggest business casualties in the COVID-19 pandemic has been movie theaters and performance venues. After all, without a vaccine the odds that many people want to go share the same breathing spaces with dozens or hundreds of people just isn’t what it used to be.

AMC Entertainment Holdings Inc. (NYSE: AMC) has found itself in a situation that is going to be very difficult. Even after certain theaters were allowed to reopen, attendance was low, and many of the films that were expected to be the next box office mega-hits were pushed out late in 2020 or into 2021.

AMC warned in mid-October that its cash resources likely would be depleted by the end of this year or very early in 2021 without new liquidity. Now AMC has filed to sell up to 20 million common shares to raise more capital. Unfortunately, that would be just $47.7 million or so, based on the filing.

The good news about the current dilution that would occur is that the company is not competing with its dividend any longer. The prior regular $0.20 per quarter payout was chopped to $0.03 in the March payment, and the company has not paid a dividend since.

[nativounit]

AMC’s capital raise may include more than one round of equity sales. According to the S-3 filing with the U.S. Securities and Exchange Commission:

AMC Entertainment Holdings, Inc. may offer and sell from time to time, in one or more series or issuances and on terms that we will determine at the time of the offering, up to 20,000,000 shares of our Class A common stock.

Note that this is to happen immediately before AMC is expected to report earnings. To say that “expectations are very low” is a grand understatement. The movie theater chain announced just last week that it was planning to report its results for the third quarter ended September 30, 2020, after the market closes on Monday, November 2, 2020.

AMC shares traded down 5.1% at $2.24 Monday afternoon. That is under the reference price of $2.39 indicated in the SEC filing, so it means that AMC will have to sell more shares to raise more money, or it will have to plan on less new capital being raised if the share price remains static.

AMC’s 52-week trading range is $1.95 to $10.35, and its market cap was last seen as just $278 million.

[recirclink id=804096][wallst_email_signup]

About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. a673b.bigscoots-temp.com.