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On the first business day of 2022, AMC Theatres CEO Adam Aron shared his New Year’s resolution with his Twitter followers.
“In 2020 and early 2021, AMC took on debt at high interest rates to survive. If we can, in 2022 I’d like to refinance some of our debt to reduce our interest expense, push out some debt maturities by several years and loosen covenants. With an improving financial position, one of our 2022 goals is to strengthen our balance sheet. There is no guarantee of success, but we will try very hard to get this done.”
The fact that AMC has an improving financial position after nearly two years of a global pandemic is something of a miracle in and of itself.
A year ago this month, the movie theater company was reeling from the pandemic, facing potential bankruptcy, and its stock was trading at $2 per share.
And then it became a meme.
Online traders gathering on platforms like Reddit and TikTok embraced the company’s stock, and propelled its share price upward (it began 2022 at $27.20 per share). What happened next may have saved the company, as AMC sold over $1 billion worth of stock, giving it a financial lifeline and leaving some 4 million retail traders (or, “apes,” as some call themselves) owning more than 80% of the company.
AMC’s memestock status gave it the cash needed to ride out what remains of the pandemic.
But it also served as an opportunity for insiders at the company, with AMC directors and executives selling about $90 million worth of stock since its rise in January 2021, according to a review of regulatory filings by The Hollywood Reporter. Aron has sold more than $30 million so far, and a form 144 filed with the SEC suggests that he intends to sell about $20 million more in the coming weeks and months.
Memestock mania was the wildest business story of 2021, and while AMC was not the only company to benefit (see GameStop, or Hertz), it is the only one to embrace it so fully, with Aron now sending tweets imploring “haters” to “#ChokeOnThat” after a film has a big opening, and posting online polls about which dog-themed cryptocurrency the company should take next.
MKM Partners’ Eric Handler maintains a target price of $1, and in a Dec. 17 research note lamented that the company’s “most significant issue … is the valuation disconnect with the share price.”
“Getting back to peak results is not going to be anywhere near close enough for AMC to grow into a reasonable multiple,” Handler added.
Indeed, if 2021 was the year AMC became a memestock, 2022 may be the year the company is really put to the test.
AMC’s cash haul, and how it uses it, will be critical. AMC may be the test case for whether being a memestock can make a real difference for a company in the real world. Aron has said the exhibitor will opportunistically buy new theaters or take over attractive leases in big markets, and he hinted in the company’s last earnings call that he has grander ideas in store as well: “These monies should allow us to think hard and boldly about how we might transform AMC into a new and different company that does a lot more than just show movies in cinemas,” he said.
Step one, however, is AMC’s plan to launch a popcorn business … and Aron’s new plan to rejigger its debt.
But December also brought a light at the end of the tunnel in the form of Spider-Man: No Way Home, which drew astonishing box office numbers even as omicron continues to test movie theaters.
“In our opinion, those who are bearish on the potential for a post-pandemic exhibition industry recovery need to take notice of what just happened,” B. Riley’s Eric Wold wrote in a note after the film’s opening. “A film released in the middle of a pandemic-driven Omicron variant surge with a multitude of at-home viewing platforms in focus just generated the third-best domestic opening weekend box office of ALL TIME.”
AMC fans and other retail traders poured money into the company’s stock sales, despite the warning that accompanied it (“Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment” [bolding theirs]), 2022 looks to be the year they find out how sharp their spider-senses are.
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