AMC EntertainmentShares of the company fell sharply on Thursday after the company announced a new $110 million capital raise and a proposed reverse stock split that requires shareholder approval.
Shares were halted shortly after the opening bell as AMC hit a new 52-week low. The stock recovered from double-digit losses earlier in the day to finish more than 7% lower at $4.91 per share. AMC is down nearly 82% this year.
The company said it plans to raise the new equity through a sale of its MONKEY units — a form of preferred stock referencing the “Apes” moniker adopted by meme stock investors — to Antara Capital LP at a weighted average price of 66 cents per share. On Wednesday, APE’s closing price was 68.5 cents. This reduces debt by $100 million, the company said.
“It is clear that the existence of APEs has served exactly their intended purposes. They have enabled AMC to raise much welcome cash, reduce debt, and thus run down our balance sheet and enable us to potentially [mergers and acquisition] activity,” CEO Adam Aron said in a press release Thursday.
In addition, AMC is proposing a reverse stock split of AMC common stock at a ratio of 1 to 10. The company is requesting a special shareholders’ meeting to approve the reverse stock split and convert APE units into AMC common stock.
The world’s largest movie theater chain has been working to ease its hefty debt burden, which grew during the early days of the Covid pandemic as theaters closed, as well as dealing with stock dilution and a movie release schedule short on blockbusters.
In November, the company posted another quarterly loss despite higher sales compared to a year earlier due to higher operating costs. Despite a significant amount of cash on the balance sheet, each quarter AMC spends more than it earns on operations such as concession and movie screening fees, as well as rent.
During the third quarter, AMC said it burned $179 million in cash.
Still, the company has said it is focusing on theatrical investments, such as upgrading movie screens and increasing the number of special effects screens like Imax and Dolby Cinema, across its territory.
The capital raise and proposed reverse stock split come a day after AMC said it was no longer in talks to buy theaters from Regal parent company Cineworld, which filed for bankruptcy earlier this year. In a securities filing, AMC said discussions with Cineworld lenders about assets in the US and Europe had ended.
AMC itself was on the brink of bankruptcy in 2021, but managed to avert it after millions of private investors turned its stock into a meme stock. The company has since devised several plans to raise more capital to reduce its debt and invest in acquisitions and theaters.
Read the full release from AMC here.