AMC Theatres Will Shut Down In 2023?
AMC theaters accrued over $5 billion in debt over the last couple of years, and investors on Wall Street are concerned that if it can't lower its debt ceiling, AMC will end up going out of business.
AMC Entertainment stocks hit a new low this week amid concerns that their theaters will close their doors for good. AMC’s stocks have fallen more than 85% this year due to their debt piling up. But their CEO and senior management have drawn up several plans to turn this sinking ship around, including plans to raise more capital, investment options, and AMC theaters upgrades. But will it be enough?
This isn’t the first time AMC theaters have come back from near extinction. In 2021, they were incredibly close to bankruptcy, but several investors helped them to retain their company. Since then, they have continued to struggle and never regained much momentum.
Now AMC’s massive debt is a concern to investors and Wall Street. This debt was accrued before the pandemic, but it has struggled to cope with a slower-moving film industry since then. These factors have caused AMC to dilute its stock, and not even several acquisitions, such as a popcorn business and a gold mine, can help its plummeting stock.
For several years their profits have not outweighed their costs, which is not suitable for any business. Much of this is from the pandemic or pandemic-related production delays and small ticket sales. With more films being released in 2023 after years of delays, the Hollywood film industry will bring in more revenue but can AMC hold on?
The company is rumored to be in over $5 billion in debt. They recently struck a deal with Antara Capital to raise some much-needed capital to reduce its overall debt. Antara Capital has bought AMC’s APE units for 66 cents each which will raise over $110 million for the company.
AMC‘s board announced last week that it would hold a special shareholder’s meeting to vote on specific criteria. This criterion includes removing the discount on the APE units. They want to simplify their capital structure by eliminating the discount applied to their APE units. AMC believes this is in the best interest of its shareholders.
Doing this reverse stock split should take AMC back to where they were in 2019 before everything began to pile up on them. In simplistic terms, for every ten shares a shareholder owns at $4 a share, they want to give one share worth $40. This switch means the shareholder loses no capital but provides AMC with more shares to sell.
While, in theory, it sounds good to have more shares to sell to remove their debt, but many financial analysts believe this isn’t the answer they are looking for. AMC may come out with more cash, but it will still have a mountain of debt and no dividends. All this plan shows is that they have overvalued their stocks.
AMC is one of the many companies in trouble due to the pandemic and the post-pandemic economy. While businesses and life is slowly returning to normal, it is taking its toll on some companies’ financial outlook. Hopefully, AMC can hold on for a bit longer as the movie industry recovers. It would be an end of an era for a lot of people if they ceased to exist.