AMC Stock Drops Significantly After Pandemic; Sells $350 Million Stocks

AMC shares experienced a significant drop despite the company reporting record quarterly earnings. The theater filed with the U.S. Securities and Exchange Commission to sell $350 million worth of stock. This filing caused a reversal in the intended stock’s trajectory, as it was thought to increase with the end of the actor’s strike. They were trading up, but with the announcement of the filing with the SEC, they experienced a drop in value. The company’s move to issue more shares has been met with resistance from retail investors, who make up a substantial portion of AMC’s base; however, following a ruling by the Delaware Chancery Court, the company can do so. 

AMC experienced a 45% increase in revenue, exceeding Wall Street’s estimates for the company and surpassing many other movie theaters. However, despite the steady profit, AMC still has to deal with the debt acquired during COVID-19, which posed a grave threat to many movie theater businesses. 

Jim Goss, a senior investment analyst at Barrington Research, said in an interview with Deadline, “Significant uncertainty remains for AMC due to its high degree of financial leverage. Management has successfully raised equity, improving AMC’s potential to move past the pandemic, but risk levels remain high.”

Adam Aron, CEO of AMC, emphasized the importance of the company’s ability to earn cash through stock as the key to moving forward in the current state. Many Wall Street analysts support this strategy to pay down debt; however, some retail investors are critical. One Analyst said, “AMC needs to continue paying down debt, and the most efficient way to do that is to issue shares. Once it has a more manageable debt load, it can transition to repurchasing shares and reinstating its dividend.” 

Adam Aron has been actively engaged with the retail shareholders active on Reddit, as they saved the company from Chapter 11 during the pandemic. It looks as though Aron is turning to them once again with initiatives to connect with the shareholders. Aron has been active on social media and has reported that he responds to every email, and AMC recently launched an investor’s website.