AMC Entertainment (NYSE: AMC) has raised $230.5 million from a share sale to Mudrick Capital. The largest American movie theater chain plans to use the money from the share sale to expand its business through acquisitions of theater assets and leases, make investments to enhance consumer appeal of the movie theater, and pay off some debt.
Along with many other businesses in various industries, AMC was deeply impacted by the coronavirus pandemic. At the beginning of the pandemic, the U.S. and most of the world were in lockdowns, which meant that movie production was put on hold and movie theaters were closed until further notice. You can imagine the financial hurt and uncertainty that AMC and other movie theater chains were feeling, being unsure of what the future of their business would look like and if they will be able to recover.
Fast-forward to a year later and you might not believe that AMC could be in the position that it is today. As COVID-19 restrictions continue to be lifted what seems like every day, and as the country strives to become vaccinated, people are emerging back into the public.
Yesterday was Memorial Day, a day to remember the veterans who have fought and served. It also marks the unofficial start of summer. It’s a day that tends to be telling about how the summer season will unravel. And this year, it told us that Americans are ready to emerge into society and see movies — among other things like travel and return to restaurants and bars.
This year’s Memorial Day weekend box office could break the $100 million mark, as there were new movie releases and more than 70% of theaters are now back open. According to Comscore, Memorial Day weekend in 2020 had just $842,000 in ticket sales, which were contributed mostly by drive-in movie theaters. Comscore senior media analyst Paul Dergarabedian said:
What a difference a year makes as we now look toward what will be a pivotal Memorial weekend for movie theaters and, thankfully, the start of a true summer movie season, something the industry hasn’t seen in two years.
A year can make a lot of difference, especially one that has been so hectic and uncertain. AMC was in a difficult and much different position a year ago than it is today. Just a few weeks back on May 13, AMC raised about $430 million when its shares gained 500% because of its “meme stock” status and efforts from traders to short-squeeze AMC. AMC continues to gain and hold the attention of these Reddit users, which has helped AMC at a time when it probably really appreciated it, since the company’s debt has increased to more than $5.5 billion.
Join Wealth Daily today for FREE. We’ll keep you on top of all the hottest investment ideas before they hit Wall Street. Become a member today, and get our latest free report: “The Private Market: Where the Action Is Now.” After getting your report, you’ll begin receiving the Wealth Daily e-Letter, delivered to your inbox daily.
However, now that there is optimism surrounding the entertainment industry and movie theater business, AMC is making investments to expand its market share and business. In a press release, AMC theaters CEO Adam Aron said:
Given our scale, experience, and commitment to innovation and excellence, AMC is being presented with highly attractive theater acquisition opportunities. We are in discussions, for example, with multiple landlords of superb theaters formerly operated by Arclight Cinemas and Pacific Theaters. With this agreement with Mudrick Capital, we have raised funds that will allow us to be aggressive in going after the most valuable theater assets, as well as to make other strategic investments in our business and to pursue deleveraging opportunities.
AMC shares rose in premarket trading on Tuesday near $28 per share. This is massive for the company. At the close of 2020, its shares were near $2 per share. The reopening of the movie theater sector and the rest of the U.S. has brought confidence back to investors and to AMC. And now the company wants to improve its business and is ready to take advantage of the opportunities that are arising from this share sale and the overall surge in the industry. Aron also said:
With our increased liquidity, an increasingly vaccinated population, and the imminent release of blockbuster new movie titles, it is time for AMC to go on the offense again.
AMC is optimistic about life after the pandemic, and the $230.5 million that it raised through this deal with Mudrick Capital is going to fuel the company to build up its business and gain more market share. AMC is already the largest theater company in the world. It has 950 theaters and 10,500 screens around the globe. Now this influx of $230.5 million will help AMC bring more innovations to its theaters and expand its business even more.
Until next time, Monica Savaglia Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.
