An AMC theater in Illinois.
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Shares of AMC Entertainment and Cinemark Holdings are falling as AMC plans another stock sale, and after both companies moved to quash hopes of a possible deal between the two.
According to a report in the New York Post, Cinemark (ticker: CNK) has indicated that it would be interested in operating some of AMC’s (AMC) theaters should the company default on its obligations. The report said Cinemark hasn’t yet pursued serious discussions.
However, a Cinemark representative said that the company “has not engaged in any discussions with AMC or any representatives regarding M&A activity, and there is no merit to the report. Consistent with our previous commentary, Cinemark’s first priority is refortifying our balance sheet following the financial impact of Covid-19.” The company will consider any M&A opportunities that arise, the representative said.
“There’s absolutely no truth to the recent reporting in the New York Post,“ a highly placed person at AMC told Barron’s. “It is utter nonsense, made up out of whole cloth.”
Early Monday, Cinemark was been up 3.5%, while AMC climbed 1.5%. By midday, though, the gains had reversed, with Cinemark falling 2.9% to $15.78 and AMC off 16.3% to $3.28.
A factor behind the loss may be more widespread doubts about the near-term outlook for businesses that have been hit hardest by the pandemic. While the market was higher in general in the afternoon, many stocks that would benefit from reopening, including restaurants and retailers, were falling.
Mandatory closures related to the Covid-19 pandemic hit movie theaters hard across the board, but AMC has found itself in a particularly tough spot. A recent filing showed that the company plans to offer as many as 178 million Class A shares as it looks to raise capital.
On Friday, AMC received a $100 million cash infusion, the latest move in its efforts to shore up its balance sheet and avoid bankruptcy, which has led to three stock sales since September. Yet this investment will only allow it to continue operating through next month; the company has said that it will need some $750 million in additional liquidity to survive 2021, and its stock has paid the price, falling more than 45% year to date.
Of course, three-quarters of a billion dollars in additional financing isn’t an insurmountable number: U.K.-based Cineworld (CINE. U. K.), which operates Regal theaters in the U.S., secured just such a deal last month. Stocks in the sector rallied in response to that, though upbeat vaccine news gave them an additional lift.
Write to Teresa Rivas at [email protected]
