The movie theater chain's stock hit a new 52 week low on Wednesday, despite a pay freeze and branded credit cards.
AMC's shares have fallen more than 85% so far this year. The company has devised several plans to raise more capital to pay down its debt and invest in theater renovations.
Thanks to millions of retail investors who turned its shares into a meme stock, the company was able to come back from the brink of bankruptcy in 2021, but it has struggled to maintain its popularity in the years since.
Concerns about AMC's massive debt load, which it had amassed prior to the Pandemic, have resurfaced as the company reduces its stock and contends with a slow-to-recover film industry. Adding a popcorn business and a gold mine didn't move the needle as the stock price continued to plummet.
AMC has not been able to make up for its costs. A slim slate of Hollywood films, the result of production delays caused by the Pandemic, and lower ticket sales are some of the reasons for that.
As more films are released to the public, there is a good chance that the domestic and global box office will recover more quickly. If at all, analysts are correct, moviegoing may not return to pre-prepandemic levels until at least the year 2025.
Eric Handler says that AMC's trouble lies in its basics.
The recent APE stock issuance and previous stock sales allowed AMC to pay down some of its more than $5 billion in debt, but that the company's overall valuation hasn't changed
The impact on valuation is insignificant. There is a credit card. It's a nice deal. These are things that add to the business.
AMC has a large number of shares outstanding, combined with its high debt levels, so things aren't as nice.
There isn't much equity value in the shares. He said that it is trading at a substantially higher valuation than theater operators do. It's at some point that fundamental matters.
A request for comment was not responded to by AMC.
AMC is trying to right the ship by selling its APE units to Antara for 66 cents a piece in an equity deal. Antara will exchange AMC notes for APE units, which will reduce AMC's annual interest expense.
Adam Aron said in a statement last week that the existence of APEs has been achieved. AMC has been allowed to raise cash and reduce debt in order to explore possible M&A activity.
It is in the best interests of our shareholders for us to simplify our capital structure because of the constant trading discount that we are seeing in the price of APE units compared to AMC common shares.
A reverse stock split of AMC common shares is included in the proposal that the company's board intends to hold a special meeting to vote on.
When contacted by CNBC, AMC didn't say anything more.
If the reverse stock split passes, it will get them back to where they were in 2019.
AMC wants to give its shareholders one share for every 10 shares they own in order to convert the individual stock value to just under $40.
AMC may have more cash in hand than it did last year, but it still has a similar debt load and no dividends, which is why this new valuation doesn't make sense.
Reese stated that it doesn't work. It says that the shares are still overvalued. They still have a long way to go.
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