(Bloomberg) — AMC Entertainment Holdings Inc. is considering raising money by selling more stock, capitalizing on the unprecedented runup in its shares this week, according to people familiar with the matter.
A stock sale would follow AMC announcing $917 million in fresh financing Monday, which helped it stave off the threat of bankruptcy. On Wednesday, it said it completed a previously announced at-the-market equity program, raising $305 million.
The world’s largest cinema chain’s shares soared as much as 85% on Friday morning in New York, rising as high as $16. AMC’s 12% bonds also led the U.S. high-yield gainers.
AMC has benefited from a Reddit-fueled investing frenzy that sent heavily shorted stocks into the stratosphere this week. Though the stock plummeted on Thursday — hurt by Robinhood and other trading platforms curbing trading in its shares — AMC remains up 307% this year through Thursday’s close.
A representative for AMC declined to comment. Reuters reported earlier that AMC was considering another fundraising effort, which could help the beleaguered theater chain weather the Covid-19 pandemic or trim its debt load.
In major markets such as New York City and Los Angeles, cinema chains have been unable to reopen locations. On Monday, AMC said fourth-quarter attendance fell about 92% in the U.S. and 89% internationally from a year earlier, and it was burning cash at about $124 million a month.
Shutdown Pain
Theater chains have been hard hit by government-mandated shutdowns during the Covid-19 pandemic. While some locations have been able to reopen at limited capacity, many moviegoers have been reluctant to attend. The problem has been compounded by studios delaying major releases that drive ticket sales.
AMC has said previously that it may seek more financing, and some creditors have suggested it sell more shares to pay down debt.
“With the rally, they need to start chipping away at their capital structure,” Jason Mudrick, whose firm last month received a combination of bonds and shares in exchange for providing $100 million of new financing, told Bloomberg earlier. “AMC should go register more shares, sell as much stock as they possibly can and use the cash to repay debt.”
AMC’s shares traded at historic lows for much of 2020 as the Covid-19 crisis engulfed the company. Management started issuing “going concern” notices in June, warning the company risked running out of cash.
The company said at the end of last year that it needed to raise at least $750 million to stay in business. Without new money, its existing cash would have been depleted as soon as this month. The company has also been talking with its landlords to amend terms of certain leases and avoid a potential cash crunch.
(Updates with share price in third paragraph.)
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