AMC Entertainment Holdings (NYSE: AMC) stock plummeted 20% in intraday trading Wednesday, reversing a two-day surge ignited by the comeback of Roaring Kitty, a key figure in the meme stock frenzy of 2021. Despite the dip, AMC stock still shows an impressive over 100% gain in the past month.
AMC Entertainment Holdings Inc., the movie theater chain, made headlines on Wednesday with its announcement of a significant financial move. The company revealed that it had agreed to issue 23.28 million shares in exchange for $163.85 million worth of 10%/12% cash/payment-in-kind (PIK) toggle second lien subordinated notes due in 2026. In essence, AMC is swapping shares for debt, a move aimed at reducing its debt burden.
While this transaction helps alleviate some of AMC’s debt load, it will dilute existing shareholders. Dilution occurs when a company issues more shares, thereby reducing the ownership percentage of existing shareholders. The company clarified that it may engage in similar exchanges in the future, although it is not obligated to do so.
AMC said,
“Based on the aggregate principal amount exchanged plus $6,872,597 aggregate accrued interest thereon through the relevant date of exchange, the Common Stock issued had an implied value of $7.33 per share.”
The news comes just a day after AMC completed its $250 million at-the-market (ATM) offering, initiated on March 28. The ATM offering involved the sale of 72.5 million shares at an average per-share price of $3.45.
Recent Financial Moves: ATM Offering and Debt Reduction
In a broader context, AMC Entertainment (NYSE: AMC) has been actively addressing its debt concerns. Last December, AMC completed a $350 million ATM offering announced in November. This transaction involved the sale of 48 million shares priced at $7.29 per share. The proceeds from this offering helped reduce debt by $62.28 million, bringing the total gross equity capital raised in 2023 to $865 million.
Despite these efforts to manage its debt, as of March 31, the corporate borrowings of AMC totaled $4.518 billion, while its finance lease liabilities amounted to $48 million. Even after the latest debt-for-equity exchange, AMC still has significant debt on its balance sheet. This suggests further dilution could be on the horizon. By the end of the first quarter, AMC had 263.4 million outstanding shares, a significant increase from 137.4 million shares the previous year. This increase follows a 1-for-10 AMC reverse stock split and the conversion of APE into AMC.
In summary, the dilution of AMC stock will probably continue as the company grapples with its substantial debt load despite its recent efforts to address it through various financing maneuvers.
AMC Entertainment (NYSE: AMC) Stock Price Action
AMC stock plunged 20% to close at $5.48 on Wednesday. Its value increased by 71.79% this week. Trading activity has witnessed 309,600,896 (309.60 million) shares changing hands, well above the average daily volume of 40.29 million.
