AMC Cuts $164M Debt, Shares Dip Amid Meme Rally

AMC leverages meme stock rally to swap $164 million debt for shares, amid financial optimization efforts.

By Barry Stearns

5/15, 09:06 EDT
AMC Entertainment Holdings, Inc.

Key Takeaway

  • AMC reduces $164 million in debt by swapping notes for stock, leveraging the meme stock rally with shares valued at $7.33 each.
  • Despite a Q1 loss and reduced cash reserves, AMC's bond value surged post-announcement; however, its shares fell 10% in pre-market trading.
  • Capitalizing on meme stock enthusiasm, AMC raised $250 million by selling 72.5 million shares amid a 65% stock price surge following Keith Gill's social media return.

Debt Reduction Strategy

AMC Entertainment Holdings is actively working to reduce its debt by leveraging the recent meme stock rally, a strategy reminiscent of its actions in 2021. The company announced a private deal to exchange approximately $164 million of its 10% notes due in 2026 for 23.3 million shares of newly-issued stock, valuing the stock at $7.33 per share, despite the shares closing at $6.85 on Tuesday. This move is part of AMC's broader effort to manage its debt, which includes other swaps and buybacks from the previous year, totaling around $200 million. AMC's proactive approach to debt management comes amid challenges, including lower movie ticket sales post-pandemic and proposals from lenders to extend near-term debt maturities.

Financial Performance and Market Reaction

AMC reported a first-quarter loss, attributed to a reduced number of Hollywood releases due to last year's strikes by writers and actors. Despite this, CEO Adam Aron remains optimistic about the company's future. AMC concluded the quarter with $624.2 million in cash and equivalents, a decrease from $884.3 million three months prior, and faces approximately $4.5 billion in long-term borrowings. Following the debt swap announcement, AMC's 10% bonds surged nearly 10 cents to 85.7 cents on the dollar. However, the company's shares experienced a 10% slump in pre-market trading, reflecting investor reactions to the debt swap and the broader implications for AMC's financial health.

Equity Capital Raise Amid Meme Stock Craze

In a significant move to capitalize on the revived meme stock craze, AMC raised approximately $250 million of new equity capital by selling 72.5 million shares at an average price of $3.45 per share. This sale was completed during a period of heightened investor interest, spurred by the return of Keith Gill, also known as "Roaring Kitty," to social media. AMC's stock soared 65% following the announcement of the sale, demonstrating the impact of retail investor enthusiasm on the company's stock price. This equity offering, along with previous ones, represents AMC's strategy to strengthen its financial position amidst ongoing challenges.

Management Quotes

  • Adam Aron, CEO of AMC:

    "Better times are ahead."