The stock offering of AMC Entertainment Holdings Inc. worth $325.5 million provides a “safety net” against the fallout from the Hollywood strikes and a chance to address debt, according to B. Riley Securities analyst Eric Wold.
The equity was raised by selling 40 million shares, before commissions and fees, at an average price of approximately $8.14 per share.
Announced on Wednesday. The company’s shares rose 3.6% on Thursday.
B. Riley Securities estimates net proceeds for AMC at at least $310 million to $315 million, after commissions, fees and expenses, and says the company can still issue a significant number of shares. “I follow those forty [million] shares issued through the [at-the-market offering]we estimate that the company would still have about 365 [million] shares authorized, but not outstanding, to potentially be issued through future equity programs,” Wold wrote.
Related: AMC stock prices are rising, boosted by a $325.5 million stock offering
In a statement released Wednesday, AMC said the stock offering increases cash reserves, addresses current liquidity concerns and strengthens the company’s balance sheet. AMC CEO Adam Aron has repeatedly warned that the company is facing liquidity problems.
“While the company had ~$4.69 [billion] of corporate debt outstanding at the end of 2011 [the second quarter of 2023]only about $103 [million] of that debt is expected to mature in 2025 (with no 2024 due dates),” Wold wrote Thursday. “Nevertheless, we believe that these proceeds not only provide a greater near-term liquidity safety net as the ongoing Hollywood strikes potentially threaten 2024 film production, but also provide an opportunity for the company to reduce principal balances for its higher interest debt to lower. scheduled to mature in 2026 and beyond (especially those tranches trading at significant discounts on the open market).
B. Riley Securities maintained its neutral rating and $45 price target on AMC.
“The only thing keeping us from being more positive at the moment is the higher valuation multiple compared to the other exhibitors and pre-pandemic averages,” Wold wrote. “However, we continue to believe that this could actually play to AMC’s advantage as this equity raised could also be used to seek out additional theaters to acquire and diversify with new growth strategies that may lie outside of the theatrical exhibition industry – all by utilizing creating equity at an increased valuation multiple allowing AMC to make these expansion moves in a much cheaper way.”
Related: AMC reverse stock split, APE conversion removes ‘overhang’, analyst says on upgrade
Of the eight analysts surveyed by FactSet, four have a hold rating and four have a sell rating on AMC.
Shares of AMC, which underwent a 1-for-10 reverse stock split in late August, are down 79.7% over the past three months, compared with the S&P 500 index’s SPX gain of 1.4%.