Shares of the largest movie exhibitor and a meme mania favorite, AMC Entertainment Holdings (AMC) are plunging in the pre-market session today after its rival Cineworld (CNWGY) confirmed that it is looking at strategic options to raise additional liquidity and possibly restructure its balance sheet. These options include a voluntary Chapter 11 filing, while the company remains in talks with its secured lenders and their advisers.
A deleveraging transaction would mean substantial dilution for existing shareholders and Cineworld noted, “Any such filing would be expected to allow the group to access near-term liquidity and support the orderly implementation of a fully funded deleveraging transaction.”
Cineworld has seen lower-than-expected viewer turnout and shares of the second-biggest movie chain in the world have nosedived 72.9% in the past five days alone. Its market capitalization now stands at about $66 million.
This decline in Cineworld stock has also led to ~31% pre-market stock price erosion in AMC shares today, on top of the 24% drop over the past five days. Last Thursday, AMC Chairman and CEO Adam Aron tried to calm investors’ nerves by saying, “We continue to be quite optimistic about the increasing demand for our portfolio of movie theatres in the fourth quarter of 2022 and calendar year 2023.”
Aron added, “As for AMC’s liquidity, AMC ended the second quarter of 2022 with more than $1 billion of liquidity, thanks to significant amounts of cash raised in calendar years 2020 and 2021.”
The statements seem to have done little to shore up investor confidence and AMC shares seem set to open today with a market capitalization of ~$6 billion. At the close of trade on Friday, the company’s market capitalization was about $9.3 billion.
Wall Street Sees Further Downside in AMC Stock
Wall Street is seeing a further 58.38% drop in AMC stock based on a Moderate Sell consensus rating and an average price target of $7.50.
Hedge funds, on the other hand, are very positive on AMC and have increased holdings in the stock by 569,400 shares in the last quarter. Importantly, Philippe Laffont’s Coatue Management has upped its AMC holdings by 175.4% recently.
Closing Thoughts
AMC’s preferred equity units begin trading today, which is also contributing to the drop in share price. While the company has highlighted its cash pile, the troubles at Cineworld continue to underscore the trend of viewers preferring to be glued to their screens at home and binge-watch on OTT platforms rather than step out to catch a movie. A short interest of almost 18.5% in the stock also indicates bears may again be gaining ground in the stock.
Read full Disclosure
