A rally driven by Reddit-powered day traders has boosted AMC shares by about 3,000 percent this year.
AMC Entertainment Holdings Inc. makes money from its wild stock market by selling more shares, a move that could raise hundreds of millions of dollars for a cinema chain that only looked at potential bankruptcy a few months ago.
AMC fell 17% in public to $ 51.83, after fluctuating market trading. The company said it plans to sell 11.55 million shares at market prices to repay debt and fund future acquisitions. Even at that price, AMC could make nearly $ 600 million.
“It would be irresponsible if the board and management did not make an increase to ensure the balance at these levels,” said Greg Taylor, chief investment officer of Purpose Investments.
Thursday’s submission for the possible sale comes two days after AMC sold 8.5 million shares for $ 230.5 million to Mudrick Capital. The shares were then reversed and sold at a profit, as the investment firm in New York said the shares of AMC were overvalued.
The company warns investors that they could dilute their stake – a prospect that could help kill AMC’s previous attempt at a much larger sale earlier this year – or even lose their entire investment.
“The market prices and trading volume of our Class A common stock shares have recently experienced extreme volatility and may continue, which could cause buyers of our Class A share significant losses,” AMC said.
The submission allows for the sale of shares in the market, which is different from a traditional offer because the buyers are in the open market where retailers thrive. Stocks sold in traditional offerings are mostly bought by institutional investors. B. Riley will handle the transaction.
An intoxicated rise in AMC shares boosted the money-loss stock by about 3,000% this year, leaving it with a market capitalization of $ 31.3 billion, making it more valuable than half of the companies in the S&P 500 index.
AMC attempted to authorize the sale of 500 million new shares earlier this year, but withdrew the plan in April amid objections from shareholders concerned about dilution. The company nevertheless said it would probably be ‘at some point in the future’.
At the time, the stock was selling for less than $ 12. At today’s prices, a similar offer could wipe out the entire debt burden of the company and leave billions more to fund AMC’s turnaround.
CreditSights analysts Matt Zloto and Hunter Martin said in a note on Thursday that a successful stock offering would be a massive first step in reducing the AMC capital structure.
The company “first emphasizes in its disclosure that the proceeds will be used for debt reduction, a change in recent disclosures that focused on acquisitions,” they add.
(Updates with opening prices in the second paragraph)
–With the help of Katherine Doherty