AMC Entertainment Holdings Inc. (NYSE:AMC) investors are witnessing a downturn in stock value once again, driven by concerns of share dilution after the movie chain filed for a $350 million stock offering on Thursday.
According to the filing, AMC plans to utilize the funds to enhance liquidity, repay or refinance existing indebtedness, and for general corporate purposes. The news resulted in a swift decline of up to 20% in AMC shares, though some losses were later recovered.
This isn’t the first time AMC faced a stock selloff due to fears of dilution. In September, the stock dropped approximately 20% when the company revealed plans to sell 40 million shares. Earlier in August, a Delaware court approved a merger between AMC and AMC preferred shares (APE), converting all outstanding shares into AMC common stock through a 10-for-1 reverse stock split. CEO Adam Aron emphasized the importance of these moves for maintaining proper cash balances in 2024 and 2025.
Despite a positive earnings report on Wednesday night, which included a narrower-than-expected loss of $0.09 per share and revenue of $1.41 billion (surpassing estimates), the focus on stock issuance overshadowed these achievements. AMC CEO Adam Aron assured investors that the impact of Beyonce and Taylor Swift movies would be revealed in the fourth-quarter earnings call.
While the earnings report was deemed positive by Wall Street, and the recent end of the SAG-AFTRA labor strike potentially provided tailwinds, the stock offering announcement took center stage, causing a significant dip in AMC’s stock value. The company’s ability to raise additional equity capital appears pivotal, but investor sentiment remains sensitive to the specter of further dilution.
Featured Image: Unsplash
