First ATM, Now Debt-For-Equity Swap, AMC Drains Equity In Bid To Stay Alive 

Volatility in "meme stocks" continued in premarket trading on Wednesday as AMC Entertainment Holdings announced a debt-for-equity exchange for $163.9 million in bonds maturing in 2026. This strategy mirrors management's approach that helped the struggling movie theater chain capitalize on retail day traders to boost liquidity in 2021. 

A regulatory filing released Wednesday morning detailed how AMC reached a deal to swap about $164 million of its 10% notes due 2026 for 23.3 million shares of newly issued stock. The new stock is valued at $7.33 per share. 

"AMC, much of whose debt trades at distressed prices, has been chipping away at its maturities through other swaps and buybacks. It exchanged around $200 million of the debt for shares last year," Bloomberg pointed out. 

Today's news sparked a rally in AMC's high-yield bonds. The company has over $2.5 billion in outstanding bonds, most of which will mature in 2026. 

first atm now debt for equity swap amc drains equity in bid to stay alive

News of the added supply sent shares down nearly 9% in premarket trading to the low $6 handle. 

Shares were as high as $11.48 early Tuesday in the multi-day meme stock mania, triggered by a post on X from Roaring Kitty, also known as Keith Gill, on Sunday night.

first atm now debt for equity swap amc drains equity in bid to stay alive

Also, on Tuesday, AMC completed a previously disclosed ATM. The deal was completed through Citigroup Global Markets, Barclays Capital, B. Riley Securities, and Goldman Sachs & Co., raising about $250 million in new capital for the struggling company. 

The old saying goes, "Strike while the iron is hot." That's precisely what AMC's management is doing: taking advantage of retail day traders by completing ATM and debt-for-equity exchanges. Somehow, this company, which should've been dead a long time ago, continues to stay alive with help from Roaring Kitty, squeezing bearish hedge funds by igniting upside momentum through retail day traders. 

We asked this question yesterday: Who's Next For The 'Roaring Kitty' Treatment?

via May 15th 2024