AMC Up in Premarket After Raising $325.5M by Selling 40M Shares
Shares of AMC Entertainment rallied over 8% in Thursday premarket trading after the company said in a press release it had completed the at-the-market equity offering. Notably, AMC secured $325.5 million in fresh capital by selling 40 million shares at an average price of approximately $8.14 apiece.
AMC Boosts Balance Sheet and Cash Reserves
AMC Entertainment said it has wrapped up its previously announced ATM equity funding round, raising around $325.5 million in fresh capital. Through the offer launched on September 6, the movie theater chain operator sold 40 million shares at an average price of $8.14 per share before commissions and fees.
Following the news, the company’s shares surged 9.2% in premarket trading Thursday.
The financing represents a much-needed boost for AMC’s cash reserves, balance sheet, and liquidity issues. In addition to fresh capital, AMC witnessed a 39% quarter-to-date surge in the industry box office annually and capitalized heavily on the record-breaking success of the ‘Taylor Swift: The Eras Tour’ film.
“The successful completion of this equity offering marks another significant milestone for AMC. Raising more than $325 million in gross proceeds has bolstered our ability to survive and then thrive.”– said AMC President and CEO Adam Aron.
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Controversy Around AMC’s New Equity Offering
AMC’s new share sale undoubtedly marks a significant stimulus for the company’s financial health. However, the fundraising is seen as a somewhat controversial event. The answer to why is that the case lies in 2021.
Two years ago, AMC became a ‘meme stock’ after its battered share price skyrocketed after an orchestrated initiative by a group of retail investors. The company took advantage of this frenzy and issued fresh equity, which it sold to raise $587 million.
However, due to its charter, the cinema chain operator faced restrictions on issuing new shares. AMC issued a preferred share class known as AMC Preferred Equity units (APEs) to address this issue. Subsequently, AMC proposed to convert APEs into common shares and carry out a 1:10 reverse stock split, but the move was delayed after the company got sued by shareholders who had not endorsed the conversion.
Later, AMC settled the lawsuit, allowing it to proceed with the APE conversion and reverse stock split plan. But the legal triumph was followed by a substantial crash in AMC’s shares, which lost roughly 70% of value in a few days.
The stock price took another beating on September 6 after AMC revealed plans to sell 40 million common shares, bringing its 1-year losses to 90%. What’s particularly intriguing is that AMC issued warnings about the substantial risks associated with investing in its shares at the time, creating a paradox as the company simultaneously sought to encourage investors to participate in its latest share offering.
All things considered, do you think AMC sits in a better position than before after its recent actions? Let us know in the comments below.