AMC’s Stock Tanks as US Cinema Chain Opts for New Share Sale to Avoid Bankruptcy
Liao Shumin
DATE:  Oct 21 2020
/ SOURCE:  Yicai
AMC’s Stock Tanks as US Cinema Chain Opts for New Share Sale to Avoid Bankruptcy AMC’s Stock Tanks as US Cinema Chain Opts for New Share Sale to Avoid Bankruptcy

(Yicai Global) Oct. 21 -- AMC Entertainment Holdings’ share price plummeted 12.71 percent yesterday on the news that it is applying to issue 15 million new shares in a desperate attempt to stave off bankruptcy as the struggling US movie theater chain faces running out of cash by the end of the year.

AMC's stock [NYSE:AMC] closed at USD3.09. The company's share price has slumped 60 percent since February.

AMC, which is owned by Chinese real estate and entertainment conglomerate Wanda Group, was forced to shutter all its cinemas from March 17 due to the Covid-19 outbreak. As of Oct. 16, 86 percent of its US movie theaters were operating again but only at between 20 percent and 40 percent capacity, the firm said in a filing to the United States Securities and Exchange Commission yesterday.

If the situation does not improve, the Kansas-based company is on course to run out of cash by the end of this year or early next year, it said. As of Sept. 30, it only had USD417.9 million in cash reserves.

The Covid-19 pandemic has brought the US cinema industry to its knees with audiences staying home and movie studios deferring the release of new blockbusters. AMC anticipates revenue for this year’s first three quarters to be just 27 percent of last year’s levels at USD1.08 billion, while its expenses are coming to double that, at USD2.17 billion, although this is still around half the firm's normal operating costs.

The company already raised USD54.7 million in a previous new share sale of 15 million Class A common stocks last month. Should AMC fail to raise enough money to meet its obligations, the firm will most likely start debt restructuring of its liabilities or file for bankruptcy, it said.

The specter of bankruptcy has been looming for some time now. On Oct. 14, Bloomberg reported that AMC “is considering a range of options that include a potential bankruptcy to ease its debt load.” However the report was refuted the same day by the company's chief operating officer who said AMC will instead try to raise more funds mostly through equity financing.

AMC is the US’ biggest cinema chain with over 8,200 screens in 661 theaters. It also operates 224 cinemas across Europe. It was acquired by Wanda for USD2.6 billion in 2012, making the Dalian-based group the world’s largest movie theater chain operator. Most of Wanda’s investment was swallowed up by AMC’s USD1.9 billion debt. So far, Wanda has earned USD326 million from stock dividends and USD500 million through share transfers.

Editor: Kim Taylor

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Keywords:   Wanda Group,AMC Entertainment Holdings