AMC Entertainment Holdings Inc. (NYSE: AMC) has abandoned a proposal to issue 500 million new shares but is proceeding with a plan to sell up to 43 million shares.
What Happened: The movie theatre chain said it will no longer seek shareholder approval to boost its authorized shares by 500 million, noting that many of its shareholders have told the company to wait.
Instead, it has registered with the U.S. Securities and Exchange Commission to sell 43 million shares of its common stock under a previous authorization in an “at-the-market” offering, saying that the smaller share sale would be sufficient to meet its cash needs for 2021. The share sale plan assumes an expected recovery in the patronage of movie theatres in the second half of this year.
AMC said it will not vote on the proposal to issue 500 million additional shares at its upcoming annual shareholders’ meeting on May 4 and is likely to revisit the proposal at “some point in the future.”
In a regulatory filing, AMC also said that for the quarter ended March 31, it expects to report a net loss in a range of $572.2 million to $567.2 million on total revenues of about $148.3 million. This compares to a net loss of $2.18 billion on revenues of $941.5 million in the prior-year quarter.
See Also: AMC ‘Under Attack’ From Short Sellers Again, CEO Says
Why It Matters: AMC has managed to avoid bankruptcy amid the pandemic after the closure of theatres forced the company into a cash crunch. The company, which reopened 98% of its locations in March, now expects the rollout of COVID-19 vaccines in the U.S. and the release of blockbuster movie titles in the coming months to boost sales this year.
AMC CEO Adam Aron had assured shareholders earlier this month that even if they approved the authorization for 500 million new shares to be issued, the company would not sell even one of those shares in the calendar year 2021. Aron also accused short sellers of attacking the company as it attempts to rebound from the impact of the pandemic.
Despite its weak finances, AMC shares have been popular among retail investors. Traders belonging to the Reddit Investor forum r/WallStreetBets bid up the AMC and other heavily shorted stocks such as GameStop Corp. (NYSE: GME) to create a short squeeze earlier this year. AMC Entertainment’s stock has returned year-to-date gains of more than 442%.
Price Action: AMC Entertainment shares closed almost 0.4% lower in Tuesday’s regular trading session at $11.46 and further declined 1.4% in the after-hours session to $11.30.
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