Dilution, dilution and dilution. That’s exactly what shareholders of AMC Entertainment (NYSE:AMC) have experienced in recent weeks, which has led to shares of AMC stock reaching a brand new all-time low of $5.55 today.
In December, AMC announced that it had completed its $350 million at-the-market (ATM) offering. The offering consisted of 48 million shares at an average per share price of $7.29.
The movie theater chain then turned around and used a portion of the proceeds to repurchase debt or exchange debt for equity, resulting in a liabilities reduction of $62.28 million.
AMC last reported debt of $4.82 billion compared to $5.55 billion at the beginning of 2021. As a result, the liabilities reduction of $62.28 million reflects just a drop of water in the debt pool.
AMC Stock Hits All-Time Low
Furthermore, it appears that the $350 million ATM offering wasn’t enough. Since its completion, AMC has entered into several privately negotiated debt-for-equity exchange agreements. These agreements have led to the issuance of over 16 million shares in exchange for 2026 10% and 12% cash/payment-in-kind (PIK) toggle second lien subordinated notes. With more cuts in the pie or the issuance of more shares, each shareholder’s slice gets smaller. As of today, AMC stock has a five-year loss of 89%.
Yet supporters of the company have remained extremely loyal to the meme stock, demonstrating the dangerous concept of groupthink. These supporters point out AMC’s entrance into the popcorn market, as well as the candy market. However, food item companies have historically carried low margins. On top of that, there is nothing innovative or exciting in entering two food markets that have been around for hundreds of years.
Meanwhile, the trend of streaming and subscription video-on-demand (SVOD) has only continued to grow, threatening the demand for movie theater tickets. The impact of the coronavirus helped intensify this trend.
In 2023, movie theater ticket sales in the U.S. and Canada actually grew to 825.2 million from 812.79 million in 2022. However, sales are still extremely below the 2019 figure of 1.228 billion ticket sales.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.Â
