Shares of AMC Entertainment (NYSE:AMC) stock were in the green after the company reported its third-quarter earnings after the market closed yesterday. However, all of those gains have now been erased, as the movie theater chain announced a $350 million common stock offering this morning.
The offering will be made from time to time with the assistance of sales agents such as Goldman Sachs (NYSE:GS) and Barclays Capital. Proceeds of the offering will be used to increase liquidity, to repay, refinance, redeem or repurchase existing debt, and for other general corporate purposes.
The movie theater company also warned that its stock could remain highly volatile:
“Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.”
AMC Files Offering for Up to $350 Million in AMC Stock
AMC stock is plunging lower on the offering news as shareholders react to the dilutive measure. The offering may also come as a surprise to some shareholders since AMC completed a $325 million offering, equivalent to 40 million shares, less than two months ago. AMC also had $729.7 million in cash as of Sept. 30. From Jan. 1, 2020, to Nov. 8 of this year, AMC stock has increased by 193.14 million shares.
“There has been significant recent dilution and there may continue to be additional future dilution of our Class A common stock, which could adversely affect the market price of shares of our Class A common stock,” said AMC.
Meanwhile, the company reported a better-than-expected third quarter. Revenue tallied in at $1.40 billion, up by 45.2% year-over-year (YOY) and beating the analyst estimate of $1.26 billion. In fact, revenue marked a third quarter all-time record-high, as did adjusted EBITDA, which was $194 million. Furthermore, diluted EPS was 8 cents, while adjusted EPS was a loss of 9 cents, which beat the analyst estimate for a loss of 25 cents.
CEO Adam Aron cautioned about the short-term effects of the Hollywood writers’ and actors’ strikes. However, these effects may now be mitigated following the announcement of a deal between the Screen Actors Guild (SAG-AFTRA) and the Alliance of Motion Picture and Television Producers (AMPTP) late yesterday.
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.
