AMC Empire 25 near Times Square is open as New York City theaters reopen for the first time in a year after the coronavirus shutdown on March 5, 2021.
Angela Weiss | AFP | Getty Images
For the world, Adam Aron is the CEO of AMC Entertainment, but “Silverback” for millions of investors in the cinema operator.
While AMC is still losing money, Aron was bullish during Thursday’s earnings call, thanking millions of Redditors and Robinhood traders for adding to the company’s stock earlier this year.
AMC said it had 3.2 million individual shareholders as of March 11, who own approximately 80% of the 450 million shares outstanding. Many of them were inspired by the r / wallstreetbets Reddit page to buy the stock. The forum selected several companies shorted out by large hedge fund groups and decided to take action.
On January 27, AMC stock exploded overnight, rising from $ 5 on the previous trading day to below $ 20 per share. The surge enabled AMC to reduce its debt burden by around $ 600 million. The stock is currently trading above $ 9 per share. On Friday, the shares were trading around 6%.
“These individual investors probably own the majority of our stocks,” Aron said during Thursday’s conference call. “You own AMC. We work for you. I work for you.”
With AMC’s new investors gathering around the stock, Wall Street analysts are a little more bearish about the company’s performance. And while Aron has accepted it, the analysts fend off harsh comments on Twitter and angry phone calls to their offices.
What Wall Street sees
Currently, the average target price of those covering the industry is $ 4.44, according to FactSet. Eric Handler, an analyst at MKM Partners, recently set his price target for the stock at $ 1.
The goal is based on an analysis of the company’s capital structure and its substantial debt burden of more than $ 5 billion. It also has deferred rental payments of $ 450 million.
For AMC to justify its current share price, Adjusted EBITDA would have to exceed its all-time high by 16%, Handler wrote in a note to investors. Or 60% higher than its current estimate for 2022.
With the reopening of the theaters, the income will flow again. In the first quarter, AMC had revenues of $ 148.3 million, a decrease of 84.2% from the same period last year. Net loss decreased from a loss of $ 2.18 billion, or $ 20.88 per share, to $ 567.2 million, or $ 1.42 per share, for the quarter.
The theater chain has been able to raise capital quickly in recent months. Aron pointed out that AMC ended the first quarter with $ 1 billion in liquidity, the highest in its 100-year history. With this money, AMC can stay afloat until 2022.
Analysts are increasingly optimistic about the cinema industry, especially as vaccination rates rise and Covid cases fall. However, many agree that it could take AMC years to pay off its debt and even longer before it is able to rethink its growth strategy.
And then there is the new pool of investors.
Rise of the monkeys
“We expect continued volatility in AMC stocks and trading momentum that has nothing to do with AMC fundamentals,” Wedbush analyst Alicia Reese wrote in a research note a week before AMC’s results were released. “So we don’t recommend buying AMC shares here.”
Analysts told CNBC that the meme stick frenzy, while well-intentioned, demonstrates a lack of understanding of how financial markets work. Investing, they say, is based on emotions.
These new investors, many of whom have only bought the stock in the past few months, call themselves “monkeys”. The name is derived from an internet meme based on the film “Rise of the Planet of the Apes” in which the main character, a chimpanzee named Caesar, communicates the expression “Monkeys together strong” in American sign language.
The phrase was adopted by private investors who are optimistic about sharply shortened stocks like GameStop or AMC. The idea is that when the “monkeys” are united they can outlast those who are lacking.
“Adam [Aron] was very polite to individual retail investors, “said Handler in an interview.” You clearly support him. And put your money where your mouth is … the stock is where it is now because of these private investors. “
As a token of appreciation, Aron said he and AMC would each make a donation of $ 50,000 to the Dian Fossey Gorilla Fund, a conservation fund dedicated to protecting endangered mountain gorillas. This is the first time the company has donated to this organization and it is a clear sign for these new investors.
AMC has postponed its annual general meeting for more than a month to give these investors the opportunity to attend the event and “make their important voices heard,” said Aron.
“Just go to Twitter, just go to Reddit, just go to YouTube, read what these people are writing,” he said. “They love AMC. And these are not people who are just going to be investors in AMC. These are going to be AMC customers who come to our theaters and enjoy watching movies in our theaters as paying guests.”
Because of these new investors, Aron said the company would change the way information is disseminated to its shareholders.
“Before, when I wanted to speak to the owner of the company, I could fly to Beijing and sit down with three or four people who have 75% of the vote,” he said. “It’s going to be a little different now … so you’ll see a lot more contact with literally millions of investors in our company and it’s going to be pretty public.”
“I started tweeting again,” he said.