Out of all the stocks that made big moves on Thursday, few would have expected that a cinema chain would be the best performing stock for the day. One of the largest cinema chains in the country, AMC (NYSE: AMC), announced that it would raise extra funds to help shore up its financial situation. While raising money normally isn’t a great sign for a company most of the time, investors cheered at AMC’s decision for the company that’s now teetering on bankruptcy.
AMC said that it would be raising an extra $428 million in new capital, before commissions and fees, by issuing more than 43 million shares. Normally, issuing more shares in this manner is never a good move, especially from a shareholder perspective. This dilutes existing equity among shareholders and generally is a sign that the company might be in trouble.
However, the reaction among shareholders was quite the opposite. Instead of seeing this as a bad sign, investors were happy that AMC was taking these steps to shore up its financials. The company has been on the edge of bankruptcy ever since the pandemic first start, which hit cinema chains quite hard. While AMC has taken on a lot of debt already in order to get by, investors are happy that the company is still trying to stay afloat rather than just give up or consider bankruptcy.
“Bringing in an additional $428 million of new equity capital will immediately buttress and fortify our liquidity profile. The additional cash raised puts AMC in a stronger position to tackle the challenges and capitalize on the opportunities that lie ahead,” said AMC CEO Adam Aron.
AMC is also expected to have a much better quarter as we move into summer. It’s pretty much guaranteed that this summer will be a much better one for cinemas than last year’s, in which people were forced to stay home and quarantine themselves.
Shares of AMC were up around 24.8% in response to the news, making AMC the best performing stock on the day. AMC continues to be a closely followed company, alongside GameStop (NYSE: GME), among social media traders, especially those who are fans of the Reddit group WallStreetBets. However, traders had more or less given up on AMC for the longest, at least until today’s jump.
Most analysts remained very pessimistic about AMC’s chances in the long term. Four Wall Street analysts have a “neutral” rating on the company, while five have some sort of “sell” rating on the stock. There’s not one analyst out there that’s optimistic about AMC’s chances. While that might be a harsh assessment, it’s not surprising given that the company still is burning through cash at an alarming rate.
AMC Company Profile
AMC Entertainment Holdings Inc is involved in the theatrical exhibition business. It owns, operates or has interests in theatres located in the United States and Europe. It provides best-in-class amenities such as plush, power recliners, MacGuffins full bars, AMC Dine-In Theatres, premium presentation. The group operates in U.S. markets and International markets. – Warrior Trading News
