Theater chain AMC Entertainment said it's selling 40 million new shares to raise money in an SEC filing Wednesday, a move that sent the stock down 23%.
AMC 34th Street theater reopens after COVID-19 closures, March 5, 2021, in New York. (Photo by Evan ... [+]
AMC’s stock fell 27% to $10 around 12 p.m. Tuesday after the news of the stock sale broke.
AMC has not announced a timeline for when this offering could begin.
The company said it plans to use the proceeds of the stock sale to pay down its debt.
This move comes just weeks after AMC conducted a reverse stock split, granting shareholders one share for every 10 shares they owned, according to the Wall Street Journal.
The theater chain’s stock is down about 70% across the entire year.
AMC’s stock became the center of a social media frenzy in early 2021 and has been what’s known as a so-called “meme stock” ever since. A meme stock is a stock that skyrocketed in price due to a large buying spree from retail investors that organize in online forums and social media. They’re incredibly unpredictable and often subject to wild swings in price due to their unorthodox investor base. In early 2021, a group of retail investors, loosely organized in the online Reddit community r/wallstreetbets, joined together to buy up shares of AMC and other stocks that had been shorted by large investment firms. This intense frenzy of buying made the price skyrocket. In June of that year, AMC reached an all-time high stock price of $72.62. At the time, AMC was in a rough financial position, but the company was able to use this newly increased stock price to raise capital and stave off an expected bankruptcy. The company is still dealing with debt. This stock offering is aimed at tackling that debt.
AMC is still recovering from the Covid-19 pandemic which temporarily shuttered most theaters across the country and shifts in the industry with more films going directly to streaming. However, the movie industry recently saw the fourth largest box office weekend in U.S. history with the blockbuster releases of Barbie and Oppenheimer. It’s also expecting good box office numbers from an upcoming film centered around pop singer Taylor Swift’s concert tour, Taylor Swift | The Eras Tour, which the company said has already earned it $26 million dollars in advance ticket sales less than three hours after tickets first went on sale.
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