Pre-Covid the movie industry was shaky at best. With audience members having a variety of electronic options for their viewing pleasure. Social media has taken the world by storm. Younger viewers would rather post about their latest prank on TikTok than sit through a movie. There were of course rare exceptions. In addition, movies have gotten longer. Much longer. 32% longer in the last 20 years according to the American Film Institute. With the current attention span of younger viewers, this would not help.
It was at the start of the pandemic when the GameStop (Ticker: GME), Short Squeeze occurred. It was an outside the bell curve moment. So much so, that it brought an entirely new generation of investors to the table. Not your mom-and-pop investors moving $50k to a mutual fund. This brought people investing $5.00, $10.00 etc., into the market. However, it brought a whole ton of these investors. Once people saw what happened with GME, everyone thought they were the next Warren Buffet of trading. They saw GME go from $2.00 to $400.00 and not only did everyone want in, but much like social media, they wanted it NOW. Not tomorrow, not in a week, but NOW.
The craving for this next generation gold rush was so intense there needed to be another one. What was next? AMC was next. It was selected as the successor to GME. The stock would run from $2.50 to $70.00 and rally the troops. These investors, self-branding themselves as APES, felt that they could select the next short squeeze. Fight the fight for the regular trader and push the hedge funds out. The problem with this was: A. They never would give up (many losing all gains), and B. They would follow a company off the cliff. Yes, people made money. Yes, they briefly saved a movie theater at the moment). Yes, they rallied, had fun, and even had the CEO Adam Aaron calling himself a silverback (What Reputable CEO would do this…. think about that).
Wahoo (and not the UVA Mascot) let us all cheer. Let us all cheer with our gorilla suits like we live in a ZOO. Since then the stock has been diluted 3 times, the CEO has sold a ton of shares, they did a reverse split in August of 2023 that saw a 10-1 split at $2.00 which would have put a $20.00 valuation per share, only to see the stock open after the split at $16.00 or $1.60 pre-split (20% loss). To where we are now. As of April 8, 2024, the stock is at $2.96. Or as those who experienced the split, $0.29 pre-split. What does this all mean? The end result, wait for it……….is the absolute lowest stock price in the history of the company. But here we are 24-months later from the meme scene on the verge of…. wait for it again…. Bankruptcy.
On April 5, 2024, the CEO of AMC stated via Twitter “I recommended to AMC’s Board of Directors that my compensation be materially reduced given the pain being felt by our shareholders.” This is not something a CEO states when a company is on the rise.
I'm sure this article and my opinion on the subject will be met with a good amount of negative responses. I am well prepared to take every criticism. I am not an investor. I would never judge those investing. Ever. Those who know me, know I try to give validated opinions with facts. If I cannot back up something with data, I will not say it. Well, in order to prepare for the onslaught from the APE community, I did a fairly substantial dive into the data. The data will be presented in a straightforward way with some comments and then I will wrap up. You, the reader, can (and should) reach your own opinion as to what comes next.
Argue, comment, belittle. Call me a fraud, a fud, a shill, whatever. Shout that I am a paid hedge fund operator from the rooftops if you must. At the end of the day, facts are facts, and no amount of denial can save you from reality.
Plus, if I worked for a hedge fund I would be retired having shorted this stock to death over the past year. But alas, here I am.
All data is presented by quarters going back to 2013.
Revenues:
Based on the revenues presented above, 2023, with ~$5BN in revenues, was almost equal to the pre covid 2019 full year. There is nothing wrong with ~$5BN in revenues. This looks good. In fact, it looks phenomenal. Based on these figures alone, the retail investors that poured money into the stock, so the company could sell shares to pay bills, are thinking they are due for an exceptional pay day.
Net Revenues or NOI – Where the water meets the sand:
You can see that even with the billions of dollars in revenues, they have had substantial losses since 2017. While we celebrated the Taylor Swift, Barbie, and Oppenheimer successes during the 2Q23 and 3Q23, the net revenues still did not exceed $13MM. Highlighted are a couple of the positive recent quarters to show how rare turning an actual profit is for the theater chain. A theater chain that has a CEO who receives a yearly compensation package in excess of $20MM a year. Without his salary, the company would more than double its NOI. Remarkable right?
With a company that turns $BN of revenues a year, the business man in me (and certainly in many others), would think that in times of a stock being the lowest in the history of the company, an acquisition would occur. Or a merger. Many talking heads on Twitter wonder why a company like Amazon, Disney, Netflix and others would not purchase a company with a current market cap of under $700MM, that produces such excellent revenues. In addition, AMC has 10,000 screens worldwide and had 240MM patrons in 2023. As the AMC crowd calls themselves gorillas, here is the 800LB gorilla in the room.
Long Term Debt:
Surprisingly, when the retail community decided to save the company, the company could have used the money retail provided to pay off debt. They paid off some according to the chart above. But not nearly enough. The reason a company cannot come in to save AMC is that they have ~4.6BN in long term debt. This is an enormous number. It takes a company, especially during a time when borrowing money is hard to do, a massive pile of cash in order to pull this off. For most companies it is just not worth it.
I do believe there are only so many ways a company can restructure and still survive. I am not sure the outcome, but I do not discredit the idea of the company going BK and reorganizing. It might be their only shot at survival.
Will AMC rise from debt-ridden meme and become a financially stable company? Only time will tell. But, with the way it looks now, the prevailing opinion for me is no. While I do get the motivations that started all this, when I take the time it takes to look a little deeper, I'm left thinking the proverbial cliff is... About as close as it appears.
Author's note:
First and foremost, I am not a financial advisor in any sense of the term. I would never judge one for their investments or give advice on the matter.
Second, I want to thank the good folks at YCHARTS (YCharts - Financial Research and Proposal Platform) for taking some time with me on this as well.
Jonathan Anderson is a contributor for Degen Magazine. His interests lie in real estate, the economy, cooking, interesting things, and the market. Follow him on Twitter for more: @I_am_stockchef
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