AMC Entertainment Unveils Deal to Sell Up to 15 Million Shares

AMC Theatres cinema

AMC Theatres cinema

The struggling exhibition giant said it expects third-quarter revenues to be below Wall Street expectations as it reopens theaters amid the pandemic.

Cinema chain AMC Entertainment Holdings is looking to raise more fresh cash to stay afloat as it offered guidance to Wall Street on its faltering financial performance that fell short of analyst expectations.

On Tuesday, AMC unveiled another equity distribution agreement with Citigroup Global Markets and Goldman Sachs to sell up to 15 million additional class A shares, with the proceeds being used for general corporate purposes, the company said in an SEC filing. AMC raised around $54.7 million through the sale of an earlier 15 million shares through a similar at-the-market offering program completed in September.

But the latest capital raise, essentially a private placement of stock, will go only so far towards easing its liquidity concerns amid prevailing market conditions brought about by the COVID-19 crisis, the company warned.

"In the event the company determines that these sources of liquidity will not be available to it or will not allow it to meet its obligations as they become due, it would likely seek an in-court or out-of-court restructuring of its liabilities, and in the event of a future liquidation or bankruptcy proceeding, holders of the company’s common stock would likely suffer a total loss of their investment," AMC said in the SEC filing as it discussed a possible bankruptcy filing.

"Assuming approximately $50 million of cash is raised from this offering, we estimate AMC will end October with roughly $400 million of cash, which should be sufficient to get the company into the middle of 2021," Eric Handler, an analyst a MKM Partners, said in an investors note on Tuesday.

"In our view, the company remains in a precarious cash position with a burn rate of about $100 million/month. As a result, additional liquidity events, which could include more equity sales or asset sales, are highly likely," Handler added.

The mega exhibitor has reopened its circuit amid the COVID-19 crisis, and AMC's latest cash raise comes ahead of New York cinemas outside of New York City being allowed to reopen at limited capacity on Friday. But AMC revealed the impact on its circuit exacted by the pandemic as it offered preliminary estimates on its third quarter and nine months financial results to Sept. 30, 2020.

AMC forecast third quarter overall revenues will be $119.5 million, against a year-earlier $1.31 billion for the same period, a preliminary estimate that fell short of an analyst consensus of $155.2 million. AMC's efforts to lure cinema-goers to its multiplexes has been hampered by limited theater capacity and the major studios delaying new film releases or moving them to the home video market.

AMC reported it had $417.9 million in cash on its balance sheet as of Sept. 30, which is down from the $508 million cash balance reported as of Aug. 31. The exhibition giant did not update guidance on its current average cash burn to keep its theater chain in operation.