AMC Entertainment struggles with falling stock, high debt load and light blockbuster schedule

AMC Entertainment deed a caller 52-week debased Wednesday arsenic the movie theatre institution contends with a monolithic indebtedness load, dilution of its banal and a movie merchandise docket abbreviated connected blockbusters.

Shares of the world's largest movie theatre institution person fallen astir 80% to nether $6 truthful acold this year, arsenic investors question the company's superior operation and wide concern strategy.

The institution came backmost from the brink of bankruptcy successful 2021 acknowledgment to millions of retail investors who turned its shares into a meme stock. Since then, AMC has devised respective plans to rise much superior to wage down its debts and put successful acquisitions, theatre upgrades, a popcorn concern and adjacent a golden mine.

In its latest effort, AMC issued a dividend to each communal shareholders successful the signifier of preferred shares called "APE," a notation to the "Apes" moniker adopted by meme banal investors. However, analysts accidental the institution was incapable to afloat capitalize connected selling disconnected these caller shares earlier disillusioned investors pulled their support.

For now, AMC has capable currency successful manus to past and run for the adjacent respective years, said Eric Handler, media and amusement expert astatine MKM Partners. As of June 30, AMC had availability liquidity of much than $1.17 billion. Its stock slump, helium added, is "purely astir the superior structure." Even astatine its depressed price, the banal is overvalued, according to Handler.

AMC has besides struggled to station a nett successful caller quarters, and its indebtedness load is $5 billion, astir $2 cardinal much than its marketplace value. The institution amassed the indebtedness anterior to the pandemic, erstwhile it acquired respective smaller theatre chains and invested successful upgrading its theaters seating and screens. While AMC whitethorn person delayed its indebtedness payments, "that doesn't needfully mean it's going to beryllium a favorable situation erstwhile they bash person to refinance," said Alicia Reese, an expert astatine Wedbush.

Reese noted that archetypal declines successful the banal came arsenic absorption executives sold disconnected shares erstwhile they were astatine their tallness successful mid-2021and steadily declined successful the months that followed. There was different selloff successful August, erstwhile AMC announced that it was issuing a dividend to each shareholders successful the signifier of preferred APE shares.

"AMC could person capitalized connected that, if they had moved precise quickly," she said. "And if they had sold capable shares to hitch retired their indebtedness balance, they could person done that. They would person mislaid each of their retail shareholders beauteous quickly, but past they would person been a spot much attractive, fundamentally, adjacent though the stock number would person been beauteous massive."

Representatives from AMC did not instantly respond to CNBC's petition for comment.

In an August missive to shareholders, CEO Adam Aron said the APE shares would "deeply and fundamentally" fortify AMC. "Given the flexibility that APEs volition springiness us, we apt volition beryllium capable to rise wealth if we request oregon truthful choose, which immensely lessens immoderate endurance hazard arsenic we proceed to enactment our mode done this pandemic to betterment and transformation," he wrote.

Then, successful precocious September, the institution hired Citigroup as an underwriter to assistance it merchantability up to 425 cardinal units of its preferred stock. Reese noted that that merchantability could magnitude to astir $750 million, a "small dent" successful the company's wide debt.

"To me, it looks similar a mislaid opportunity," she said. "And present APE shares are priced truthful debased that it's not arsenic large to presumption arsenic they saw themselves successful mid August."

APE shares, which started trading successful August, were down astir 5% connected Wednesday, falling to their lowest constituent yet. The shares person a 52-week precocious of $10.50, which was achieved successful precocious August.

These APE shares were designed arsenic a workaround, of sorts, to assistance escaped up AMC to merchantability further units of banal arsenic it works to revive its concern aft the pandemic. The institution raised billions during the pandemic by selling caller banal but ran retired of shares to sell. Investors, including AMC's astir stalwart fans, feared dilution and rejected the company's efforts to contented further stock.

Reese noted that earlier the retail investors began buying up banal successful precocious 2020 and aboriginal 2021, AMC had astir 100 cardinal shares outstanding. That fig ballooned to 500 cardinal implicit the adjacent 2 years.

Now, the operation of AMC's regular shares and its APE preferred banal equates to much than a cardinal outstanding shares.

"They've been diluted into oblivion," Reese said.

Also weighing connected investors is simply a important deficiency of blockbuster contented during the past fewer months of the year.

There are lone four would-be blockbuster releases coming to theaters earlier the extremity of the year: Warner Bros.′ "Black Adam (Oct. 21), and Disney's "Black Panther: Wakanda Forever" (Nov. 11), "Strange World" (Nov. 23) and "Avatar: The Way of Water" (Dec. 16.)

In 2019, determination were astir two-dozen blockbuster-style films slated connected the calendar for the past 4 months of the year, including "Star Wars: The Rise of Skywalker," which generated $177 cardinal successful home summons income during its opening weekend.

Audiences person returned to cinemas successful the aftermath of the coronavirus pandemic and are spending much than ever connected tickets and popcorn. However, the deficiency of dependable theatrical releases volition measurement heavy connected the manufacture during the last months of the year. AMC should beryllium capable to thrust retired this deficiency of contented due to the fact that of its important currency stockpile.

"You request your adust pulverization to defender against immoderate benignant of disruptions," Handler said. "I deliberation they tin limp on for galore years with their existent equilibrium sheet."

Hollywood accumulation has ramped backmost up, and the merchandise calendar volition amended successful 2023 and beyond. Currently, the 2023 container bureau is expected to scope astir $9.5 cardinal successful full summons sales, according to estimates from Eric Wold, elder expert astatine B. Riley Securities. For comparison, the 2019 container bureau reached $11.4 billion.

"I deliberation the outlook is affirmative for AMC with the imaginable to instrumentality to pre-pandemic container bureau by 2024," helium said.