AMC Jumps 21% After Raising $231 million from Share Sale

It's time "to go on the offense again," CEO Adam Aaron says.
Jennifer ChanJun 01,2021,19:00

The stock in AMC Entertainment (NYSE AMC) rallied again on Tuesday after it announced it was raising $230.5 million from a share sale.

The world’s largest movie chain said in a statement today that it has agreed to sell 8.5 million shares to Mudrick Capital Management, L.P. priced at $27.12 each. The pricing represents a 4% premium from Friday’s close of $26.12 per share.

AMC, which reportedly has roughly $5 billion in debt, plans on using the proceeds for possible acquisitions of additional theatre leases, improving its existing theaters, and “exploring deleveraging opportunities.”

Specifically, Adam Aron, the chief executive officer of AMC noted that the company is in talks with “multiple landlords of superb theatres,” which were previously operated by Arclight Cinemas and Pacific Theatres.

“With this agreement with Mudrick Capital (MUDSU), we have raised funds that will allow us to be aggressive in going after the most valuable theatre assets, as well as to make other strategic investments in our business and to pursue deleveraging opportunities,” Aron said.

“With our increased liquidity, an increasingly vaccinated population and the imminent release of blockbuster new movie titles, it is time for AMC to go on the offense again.”

Yes, the coronavirus pandemic is coming to an end, but that doesn’t completely justify the stock more than doubling in the past week or so. The big reason why the stock has been rallying is that the Reddit gang is back tormenting hedge funds and driving up the price in this second phase of the epic short squeeze. Intraday, the stock in AMC was trading 21% higher from Friday at $31.60 per share.

If only I would have known ahead of time, I wouldn’t have put a stop-loss limit on AMC at $11.50 per share last month. Maybe executives that sold stock in March would have held on just a little bit longer. And perhaps Chinese conglomerate Wanda Group Co. wouldn’t have sold virtually all of its holdings in AMC so quickly.

But here we are.

It looks like the Reddit gang has not only saved the company from bankruptcy but has now allowed it to make investments to improve its business.