Company / Analytics

Analytics, 04 June 2021

What you should know about AMC stock

AMC Entertainment— the company whose stock has gained more than 2,300% this year amid a rally in meme stocks—has raised $1.25 billion through stock sales this quarter alone. The entertainment company will seek consent from shareholders to raise additional 25 million shares at its annual meeting on July 29. If approved, AMC could issue such shares starting in 2022. But shares lost on Thursday following the news, including that the company had sold 11.55 million fresh shares in that morning.

How is the stock performing?

AMC stock settled to close down 17.9% at $51.34, after swinging from an intraday loss of as much as 39.8% to a gain of as much as 10.0% in afternoon trading. Shares then fell about 5% in after-hours trading, when AMC announced its proposal for shareholders to approve more stock sales.

The stock has soared 402.8% quarter to date, while shares of fellow movie theater operator Cinemark Holdings Inc. have gained 13.0% and the S&P 500 index has tacked on 5.5%.

But it has also experienced volatility in recent times. On Thursday alone, the stock was halted three times, all within the first half-hour after the open. The seesaw session comes after the stock had rocketed 95.2% on Wednesday, and 417.8% over the previous seven sessions, amid renewed interest in meme stocks.

In a statement, the company announced noted that “we believe the recent volatility and our current market prices reflect the market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last.”

How many shares are in circulation?

On Thursday, AMC sold 11.55 million fresh shares in the morning, before asking investors for the right to issue an additional 25 million. The stock was down about 23% just before AMC announced the completion of the stock sale program.

The company said it raised about $587.4 million from the stock sales, which were made at an average price of $50.85. While that price was 1.0% below the closing price, it was 25.9% above the intraday low of $37.66. The volume-weighted average price was $53.83.

After the day’s wild trading session ended, AMC revealed in a news release and filing with the Securities and Exchange Commission that it will ask shareholders for the authority to issue up to 25 million shares. The number of 25 million shares is significantly smaller than a previous request to authorize 500 million shares that was withdrawn, after an uproar from investors.

The company said it plans to use the proceeds from the share sales for general corporate purposes, which could include repayment of the debt, acquisition of theater assets, or capital expenditures.

AMC had entered into the ATM agreement with sales agents B. Riley Securities Inc. and Citigroup Global markets Inc. The company said it would pay the sales agents a commission of up to 2.5% of the sales price of the stock, which would equate to about $14.7 million.

The company is also looking at a number of acquisition opportunities, including buying up several ArcLight and Pacific theater locations that were shuttered during the pandemic, and would use funds raised through stock sales to do so.

The number of shares sold represented about 2.6% of the shares outstanding as of May 2.

Should you buy AMC?

Anyone tempted by AMC Entertainment stock’s wild trading this week may want to take a look at what the company has to say, in particular, AMC’s warning on recent volatility in the stock price, discussed above.

The current consensus among 10 polled investment analysts is to hold stock in AMC Entertainment Holdings Inc. This rating has held steady since May when it was unchanged from a hold rating.

The 7 analysts offering 12-month price forecasts for AMC Entertainment Holdings Inc have a median target of 3.70, with a high estimate of 16.00 and a low estimate of 1.00. The median estimate represents a -93.07% decrease from the last price of 53.36.

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