AMC Entertainment Holdings Inc. faced a steep decline in its stock price on Thursday after revealing an equity-distribution agreement that could see the company selling as many as 40 million common shares. This announcement led to a 19.5% drop in AMC‘s stock value during morning trading, leaving it just slightly above the closing price on August 29th, which marked the lowest point since January 6, 2021.
The potential sale of these shares, if it occurs, could represent up to 7.7% of the 519.2 million common shares outstanding as of August 4. The method of sale is not yet determined and could take the form of “at the market offerings” or sales through sales agents via block trades. AMC entered into the equity-distribution agreement with Citigroup Global Markets Inc., Barclays Capital Inc., B. Riley Securities Inc., and Goldman Sachs & Co.
AMC has stated its intentions to use the proceeds from any share sales to bolster liquidity, repay, refinance, or redeem debt, and for general corporate purposes.
This stock price drop followed a recent upswing where AMC’s shares had gained 25% over the past four sessions. The optimism stemmed from a surge in moviegoing and AMC’s announcement that it would act as the theatrical distributor for “Taylor Swift: The Eras Tour,” a concert film set to premiere in theaters in October. This move marked a significant shift for AMC, entering the realm of theatrical distribution as a new line of business.
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Eric Wold, an analyst at B. Riley, noted that given AMC’s status as the largest global theater circuit operator, it made sense for the company to venture into theatrical distribution. He believes that by further capitalizing on the AMC theater circuit through alternative content offerings, this new direction could boost profitability and potentially lead to increased valuation multiples, which would likely be well-received by investors.
It’s worth noting that AMC’s stock underwent a 1-for-10 reverse stock split in late August, and over the past three months, its value has plummeted by 73.2%, in stark contrast to the S&P 500, which has seen a 4.5% gain during the same period.
On a more positive note, Hycroft Mining Holding Corp. announced on Wednesday that a recent study indicated significantly higher average recoveries for gold and silver compared to previous findings. This news contributed to a 9.6% surge in Hycroft’s shares during morning trading. Interestingly, AMC stands to benefit from this development, as it is Hycroft’s largest shareholder, holding 11.7% of the gold and silver miner’s outstanding shares, according to FactSet data. Over the past three months, Hycroft’s stock has experienced minimal fluctuation, slipping less than 0.1%.
