(Bloomberg) — Retail traders flocking to AMC Entertainment Holdings Inc. in hopes of burning short sellers may also be helping the company shore up its finances.
Most Read from Bloomberg
That’s because the beleaguered movie theater chain, which surged 78% on Monday amid the meme-stock frenzy, has a fundraising deal known as an at-the-market offering that lets it create new shares opportunistically to sell to buyers in the open market. The deal is part of AMC’s long-term effort to secure the capital needed to execute its turnaround, even if that means diluting investors seeking to cash in on short-term rallies.
“You’d be crazy not to sell shares into this ridiculousness if you’re running the company,” said Tuttle Capital Management CEO Matthew Tuttle.
As of May 8, the company could raise roughly $125 million in additional cash through the program, meaning it could sell some 24 million shares based on Monday’s $5.19 close.
The financing deal has already generated $124 million, before commissions and fees, through the sale of 38.5 million common shares after being unveiled in March. That would indicate an average price of $3.22, a more than 90% plunge from where the stock was trading just a year ago.
While the dilution would hit the very investors that have powered the shares higher, it’s nothing new for AMC or the meme-stock crowd. Over the past four years, the company has announced at least five equity offerings, data compiled by Bloomberg show, selling millions of shares in the process.
Navigating a massive debt load of $4.5 billion has been top of mind for AMC management, something the share sales are meant to address. The company had $624 million in cash and equivalents at the end of March, after losing nearly $165 million in the quarter, according to a filing last week.
The gains “may do little to soothe concerns surrounding structural issues for the movie-theater chain,” Bloomberg Intelligence analysts Geetha Ranganathan and Kevin Near wrote Monday.
Even after the stock’s Monday surge, it remains down 99% from its June 2021 closing high.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
Source Agencies
