AMC aims to raise up to $844 million to stave off default until a vaccine is widely distributed
- AMC aims to raise up to $844 million through the sale of 200 million shares to meet cash needs, according to a Securities and Exchange Commission filing published Thursday.
- The theater chain has burned through the bulk of its cash reserves as virus restrictions and a lack of major releases cut into business. AMC warned in October that it could run out of money by the end of the year.
- The upcoming stock sale will likely raise far less than the $844 million target, as shares plummeted 16% into Thursday's close.
- The stock fell on news that Warner Bros. will show its 2021 releases on HBO Max the same day as their theatrical debuts.
- Watch AMC trade live here.
AMC filed plans to raise up to $844 million through stock sales on Thursday after past warnings that the theater chain could run out of money.
The company aims to as many as 200 million shares at a proposed price of $4.22 each, according to a Securities and Exchange Commission filing published Thursday. The offering stands to help AMC avoid bankruptcy. Theaters have been among the businesses hit hardest by the pandemic, and soaring COVID-19 case counts further drag on the already battered industry.
Distribution of a coronavirus vaccine could quickly boost theater business, and public health experts expect a shot to be rolled out next year. Still, widespread distribution will likely not be achieved until 2022, leaving theaters in a rut.
AMC warned investors in October that a lack of new releases and ongoing closures in key markets could leave the company strapped for cash by the end of 2020 or early 2021. The theater chain said it was considering funding options ranging from stock sales to joint ventures with business partners.
In the Thursday filing, AMC cautioned that the ability to "obtain additional liquidity" is needed to keep shareholders from suffering a "total loss" on their investment. The company will likely need to pursue restructuring or bankruptcy proceedings should it fail to reach normalized revenue levels, AMC added.
AMC held roughly $417 million in cash and cash equivalents at the end of the September quarter, while cash burn over the period totaled $388 million.
The actual amount raised by the upcoming stock sale will very likely land below the $844 million target established in the filing. Shares tumbled roughly 16% into Thursday's close on news of the offering. At the closing price of $3.63 per share, the proposed sale would raise $726 million.
Shares also saw pressure from Warner Bros.' decision to show its 2021 releases on HBO Max the same day as their theatrical debuts. The move pivots from previous plans to stick to theatrical releases and strikes a major blow to AMC and peer businesses.
AMC traded at $3.56 as of 10:20 a.m. ET Friday, down 51% year-to-date. The company has three "buy" ratings, 10 "hold" ratings, and four "sell" ratings from analysts.
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