The shares of movie theater owner AMC (NYSE:AMC) plunged 37% on Sept. 6 after the company announced that it would sell “up to” 40 million more shares of AMC stock. But today, the shares are up and trending on social media after the company announced that it had raised $325.5 million from the transaction “before commissions and fees.”
AMC stock is up about 3.5% this morning but still down over 70% year-to-date.
More About the Transaction
The shares of AMC stock were sold “at an average price of approximately $8.14 per share.” The company reported that the capital from the deal “significantly boosts AMC’s cash reserves, addresses current liquidity concerns, and fortifies (its) balance sheet.”
Moreover, according to AMC, the transaction, combined with two other positive catalysts, has helped its business this quarter.
The two upbeat developments cited by the company are its 39% year-over-year increase in box office sales so far this quarter and “the record-breaking success of the highly anticipated TAYLOR SWIFT THE ERAS TOUR concert film.”
Taken together, these developments are enabling it “to continue along its successful recovery glidepath.”
AMC Still Faces Major Challenges
As of the end of last quarter, AMC had $9.66 billion of debt, while “its low current ratio of 0.43 indicates that it may have difficulty paying its debts in the medium term.” While the funds that the firm raised from this month’s offering and a previous, similar offering of $587.4 million completed in July will improve its balance sheet, the company’s financial outlook is far from smooth. And all of the new shares of AMC stock that the firm has sold will weigh on its share price.
Also noteworthy is that the ongoing Hollywood strikes could materially hurt AMC in the coming months, while Citi in July placed a $1.65 price target and a “sell” rating on the shares.
On the date of publication, Larry Ramer 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.
