A long-struggling meme stock is back in the green today on a positive update. AMC Entertainment (NYSE:AMC) has announced plans to refinance its debt burden. The company says it will “undertake a series of refinancing transactions to extend the maturity of about $2.5 [billion] of existing debt.” As of now, the company plans on extending its debt through 2029 and beyond.
What’s Happening with AMC Stock
Seeking Alpha notes that AMC and its subsidiaries will be issuing “$1.2 [billion] of new term loans and about $414 [million] of exchangeable notes for cash, for about $1.6 [billion]” as part of this restructuring process. According to CEO Adam Aron, he is “ever more confident in the future of our business.”
But that isn’t a guarantee for investors. The company has a long list of strikes against it, including a significant cash burn problem. As InvestorPlace contributor Larry Ramer reports:
“Another factor that makes AMC one of the stocks to sell ASAP is the fact that its operations generally burn significant amounts of cash each quarter. For example, in Q1, its operations burned $188.3 million of cash, and in the previous quarter it lost $77.8 million of cash on its operations. As a result, it cannot fund the payments on its debt from profits from its business.”
Additionally, the movie theater industry is still facing an uncertain future.
Although Aron stated in today’s press release that the box office is on track for a recovery in the second half of 2024 through 2026, not everyone agrees. One Forbes contributor wrote in June that the summer blockbuster season hasn’t seen a worse start since 1998. And without releases like Barbie and Oppenheimer, it is unlikely that AMC will be able to match last year’s cinema frenzy.
AMC stock closed up 5.4% on Monday, although shares have pulled back slightly in afterhours trading. For investors, it will be critical to watch for blockbuster developments and for whether AMC is able to meaningful reduce its debt. According to Aron, today’s transactions may help it do just that, but only time will tell.
On the date of publication, Samuel O’Brient did not have (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
