AMC equity offering a ‘safety net’ and chance to reduce debt balances: analyst

B. Riley Securities estimates net proceeds of at least $310 million to $315 million to AMC after commissions, fees and expenses and says the company could still issue a significant number of shares. “Following those 40 [million] shares issued through the [at-the-market offering], we estimate the company would still have approximately 365 [million] shares authorized, but not outstanding, to potentially issue through future equity programs,” Wold wrote.

Related: AMC’s stock climbs, boosted by $325.5 million equity offering

In a statement released Wednesday, AMC said that the equity offering boosts its cash reserves, addresses current liquidity concerns and fortifies the company’s balance sheet. AMC CEO Adam Aron has repeatedly warned that the company faces liquidity challenges. 

“While the company had ~$4.69 [billion] of corporate debt outstanding at the end of [the second quarter of 2023], only approximately $103 [million] of that debt is scheduled to mature in 2025 (with no maturities scheduled in 2024),” Wold wrote on Thursday.  “Nevertheless, we believe these proceeds not only provide an increased near-term liquidity safety net while the lingering Hollywood strikes potentially put the 2024 film slate at risk but also provide an opportunity for the company to reduce the principal balances for the higher interest rate debt scheduled for maturity in 2026 and beyond (especially those tranches that are trading at meaningful discounts to par in the open market).”

B. Riley Securities maintained its neutral rating and $45 share-price target for AMC.

“The only thing currently holding us back from being more positive is the higher valuation multiple relative to the other exhibitors and to pre-pandemic averages,” Wold wrote. “However, we continue to believe this can actually play into AMC’s benefit as this equity capital being raised can also be used to seek out additional movie theaters to acquire and diversify with new growth strategies potentially outside the theatrical exhibition industry — all by using equity with an elevated valuation multiple that allows AMC to make these expansion moves in a much less expensive manner.”

Related: AMC reverse stock split, APE conversion remove ‘overhang,’ analyst says in upgrade

Of eight analysts surveyed by FactSet, four have a hold rating and four have a sell rating for AMC.

AMC’s stock, which underwent a 1-for-10 reverse stock split in late August, has fallen 79.7% in the past three months, compared with the S&P 500 index’s 
SPX
 gain of 1.4%.