AMC Entertainment, alongside GameStop, experienced a surge in its stock price after Keith Gill, also known as “Roaring Kitty,” reappeared online after a three-year hiatus. This resurgence led to AMC shares more than doubling since Friday's closing price, reaching over $6 during afternoon trading on Tuesday. The last time retail investors rallied around AMC, the movie theater chain managed to avoid bankruptcy. Now, with another wave of memes driving up its stock price, AMC has an opportunity to address its significant debt load.
Under the leadership of CEO Adam Aron, AMC made three major acquisitions in a short period after 2015, including the theater chains Carmike, Odeon, and Nordic. While these acquisitions expanded AMC's theater network, they also increased the company's debt levels significantly. The initial debt coupled with the additional debt incurred during the pandemic put pressure on AMC's financial stability. As of the beginning of 2022, AMC has paid down nearly $1 billion of its debt, but a substantial amount of $4.6 billion still remains. With significant debt maturities coming up in 2024 and 2025, the looming $2.96 billion due in 2026 requires particular attention.
AMC's financial situation is further complicated by the substantial interest expenses it incurs, totaling around $100 million every quarter. The ongoing recovery of the box office, coupled with production shutdowns due to the pandemic and strikes, has limited AMC's ability to cover its fixed expenses, including rent and employee payroll. To address these challenges, AMC recently raised $250 million of new equity capital through a sale that concluded just as the meme stock craze reignited. This offering aimed to bolster the company's liquidity and reduce its debt levels.
Analysts believe that the recent surge in AMC's stock price provides an opportunity for the company to raise additional equity funds. By leveraging this momentum, AMC could potentially improve its financial structure, attract institutional investors, and negotiate more favorable terms with its lenders. While certain debt obligations pose challenges in the coming years, renegotiating and extending maturities could alleviate some of the financial pressures on the company.
AMC Entertainment faces a critical juncture as it navigates through another meme craze and works to address its debt obligations. The resurgence of interest in meme stocks, fueled in part by the return of influential figures like Roaring Kitty, presents both challenges and opportunities for AMC. The company's ability to capitalize on its current momentum, manage its debt effectively, and secure long-term financial sustainability will be key to its future success in the evolving entertainment industry landscape.