AMC Entertainment (NYSE:AMC) is a favorite of meme stock investors and moviegoers — and for good reason. The theater chain’s hundreds of locations have provided a nostalgic pastime for many and the business does appear to be rebounding from pandemic lows. Unfortunately, though, AMC stock hasn’t played ball. Despite a brief surge tied to recent meme mania, shares have headed consistently lower, at least in recent weeks.
Today, AMC stock is down almost 2% in early afternoon trading, continuing this trend. However, this move comes on reports that the company is looking to renegotiate some of its debt and extend its near-term maturities.
While details are still emerging, this news should be a positive for AMC. Let’s dive into why that may not be the case right now.
AMC Stock Falls Despite Debt Talks
Whenever a company is forced to renegotiate its debt with lenders, there’s typically some structural pain beneath the surface. That’s probably a contributing factor to today’s decline in AMC stock, with investors likely repositioning their bets around AMC’s ability to handle its current debt load.
Estimates are that AMC currently holds around $4.5 billion in debt, with more than $2.8 billion coming due in 2026. While the company did sell another $250 million of shares during the meme stock rally we saw in May, that’s not going to make much of a dent in the overall debt picture playing out.
Current estimates are that AMC has a little more than $600 million on its balance sheet. So, unless the company is able to turn cash flow positive in a big way — and quick — there’s the likelihood that it could be in trouble over the next few years.
We’ll have to see how these debt talks go. But for now, bondholders appear to be in the driver’s seat. And if they don’t agree to some sort of deal, it’s entirely possible that AMC equity holders could be on the hook for a complete loss.
On the date of publication, Chris MacDonald 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.
