Update (1800ET): Just when you thought it was safe to turn off your AMC-focused mind, after an extremely volatile trading day, AMC filed a preliminary proxy statement with the SEC in connection with the Company’s 2021 Annual Meeting scheduled for July 29, 2021.
The preliminary proxy statement, which is subject to SEC review, includes the following important proposals:
Increase authorized share capital by 25 million shares (effective in 2022)
Re-elect certain directors
Approve the appointment of Ernst & Young LLP as independent auditors
Approve a non-binding vote on the compensation of executive officers
Ability to adjourn the stockholders meeting if necessary
The AMC Board recommends a vote in favor of each proposal. The specific details and rationale for the recommend vote are described within the preliminary proxy statement. A final proxy statement is expected to be filed with the SEC and distributed to shareholders on or about June 16, 2021. Voting will take place between June 16 and July 28.
Commenting on the upcoming Stockholders Meeting, Adam Aron, AMC President and CEO, said,
“I encourage all of our valued shareholders to exercise their right to have their voices heard and impact the future AMC by voting their shares.”
Commenting on the proposal to increase authorized, not issued, share capital by 25 million shares, Aron added,
“To successfully navigate the road ahead, we seek to assemble all of the financial tools that might help us.
An important tool for any company is having shares available to issue if, and only if, the right value creation opportunity arises. As of today, in our efforts to best position AMC for a successful recovery from the pandemic, we have issued or reserved substantially all but 46,124 of the shares that were previously authorized.
We are requesting that shareholders authorize only an additional 25 million shares and note that these shares cannot be issued in calendar year 2021.
This contrasts with a previous request that shareholders authorize 500 million new shares. We have been listening carefully to the sentiments being expressed by our shareholders, and this more measured proposal is important to give AMC the flexibility to respond to future value creation opportunities for the benefit of AMC and all of its shareholder owners.”
Indeed, it’s a major retreat from that request earlier this year to authorize 500 million new shares. That proposal was originally up for a vote in May, but the annual meeting was postponed and the request withdrawn after it became clear investors would shoot it down.
Bear in mind that while the beleaguered theater chain raised more than $1.2 billion in capital this quarter, thanks in part to Reddit 'Apes', CEO Aron cautioned that the stock could still sink (to nothing) in this morning's issuance filing.
“We believe that recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business,” AMC said in its pitch to investors.
The company cautioned against buying the shares unless investors were willing to risk “losing all or a substantial portion of your investment.”
There are, of course, two sides to this (which assume any form of fundamental analysis):
1) Bullish - The smaller level of dilution is a positive for equity investors (ceteris paribus). The push out to 2022 suggests a strong signal of confidence by the executives that AMC shares are not about to crash back to being worthless. The 25 million shares is also only around a quarter of the current short interest, thus not really allowing shorts out easily (amid some speculation that the company has been issuing shares to allow shorts to cover).
2) Bearish - This company still has billions of dollars in debt to repay and free cash flow is de minimus at best. They need to delever and without the ability to issue more equity (until at least 2022 and in smaller size) suggests the company's credit outlook is not positive at all (and therefore nor is its equity value).
Though AMC does not have any massive debt repayments due in 2022 other than that loan in February...
And since the 2026s are now trading above par, it would seem bond investors are just as confident of this newly minted behemoth surviving as the Reddit Rebels...
For now, the market sees it as bullish, with AMC shares rising after the news.
Additionally, WSJ reports that AMC Entertainment Holdings Inc. said it "has received a number of inquiries regarding so-called synthetic shares and fake shares."
The company said it "has no reliable information about this, therefore we can make no comment in this regard." The movie theater operator also has "received a number of inquiries regarding speculation about a potential split or reverse split of our stock."
AMC said it "has no plans to propose or take any actions regarding a stock split or reverse stock split, and in any event such actions would require shareholder approval."
AMC said it "understands that there is considerable trading in derivatives on the company's stock including both put and call options."
It added that "derivative securities can have the effect of increasing the volatility of AMC's share price, and while they can be structured to replicate the economics of owning or short selling real AMC shares, they carry no voting rights."
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In a day when AMC has already traded a whopping $14.4BN in stock, making it the most traded name in the market surpassed the runner up TSLA by 100%...
... it is probably not a surprise that amid this epic volume, the at the market offering announced earlier today by the company has already been absorbed and moments ago AMC announced that it had completed its stock offering, raising $587.4 million in new capital from the sale of 11.55 million shares at an average price of $50.85.
Commenting on the second capital raise in three days, AMC CEO Adam Aron said that "bringing in an additional $587.4 million of new equity on top of the $658.5 million already raised this quarter results in a total equity raise in the second quarter of $1.246 billion, substantially strengthening and improving AMC’s balance sheet, providing valuable flexibility to respond to potential challenges and capitalize on attractive opportunities in the future.”
AMC Entertainment Holdings, Inc. (NYSE: AMC) (“AMC” or “the Company”), announced that it has completed its 11.550 million share at-the-market (“ATM”) equity program launched earlier today. AMC raised approximately $587.4 million of new equity capital, before commissions and fees, at an average price of approximately $50.85 per share.
Commenting on the capital raise, AMC President and CEO Adam Aron said, “Bringing in an additional $587.4 million of new equity on top of the $658.5 million already raised this quarter results in a total equity raise in the second quarter of $1.246 billion, substantially strengthening and improving AMC’s balance sheet, providing valuable flexibility to respond to potential challenges and capitalize on attractive opportunities in the future.”
The stock, after tumbling as low as $38 earlier in the day, has spiked on the news and is already more than 10% higher compared to the average sale price as the reddit army returns with a vengeance.