The path to recovery for global movie-theater chain AMC Entertainment (NYSE:AMC) since the onset of the Covid-19 pandemic hasn’t been easy. We could hope for AMC stock to return to its meme-stock-craze heights, but the facts and circumstances surrounding AMC Entertainment shouldn’t inspire investors’ confidence in 2024.
AMC Entertainment CEO Adam Aron is an enthusiastic cheerleader for his company. Beyonce and Taylor Swift concert films boosted AMC Entertainment’s box-office results. However, a recent capital-raising announcement could question AMC Entertainment’s financial health.
AMC Entertainment Discloses Share-Sale Plans… Again
In light of a recent filing, investors might get the “I’ve seen this movie before” feeling. Specifically, AMC Entertainment revealed its plans to sell as much as $250 million worth of the company’s stock shares.
Evidently, AMC Entertainment seeks to bolster its capital position in the wake of “low first-quarter box office” results. It seems that AMC Entertainment continues to feel the impact of last year’s writer and actor strikes.
Are you getting that feeling of deja vu yet? As you may recall, AMC Entertainment filed to sell as much as $350 million worth of stock in November of last year.
Aron might try to spin these developments as positive for AMC Entertainment, since capital raises will boost the company’s liquidity. Yet, it’s unsettling that AMC Entertainment feels the need to raise capital after dealing with “low first-quarter box office” results.
Frankly, it’s not unreasonable to wonder whether the company will engage in share-dilutive capital-raising efforts in the future.
The Uncomfortable Weight of AMC Entertainment’s Debt Load
In case the capital raise and the “low first-quarter box office” admission isn’t worrisome enough, check this out. According to Bloomberg, AMC Entertainment’s long-term debt load is approximately $4.6 billion.
It’s gotten to the point where AMC Entertainment’s senior lenders reportedly “met by phone … to discuss ways to bolster the company’s balance sheet.” That’s certainly not a good sign, wouldn’t you agree?
Remember, AMC Entertainment’s market capitalization is only around $800 million. This fact should help to put the company’s $4.6 billion long-term debt burden into context.
Meanwhile, AMC Entertainment’s investors still have to come to terms with the company’s 54-cents-per-share earnings loss in 2023’s fourth quarter. That was certainly a disappointing result after AMC Entertainment posted per-share profits in 2023’s second and third quarters.
Prepare for More Downside With AMC Stock
As the old saying goes, the numbers don’t lie. AMC Entertainment’s financial facts indicate that the company continues to struggle four years after the onset of Covid-19.
Can Aron stage a terrific turnaround for AMC Entertainment? Anything’s possible, but investors should focus on the data rather than on hope and hype. Therefore, AMC stock is too risky to buy now and should be avoided as long as AMC Entertainment carries a hefty debt load.
On the date of publication, David Moadel 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.