AMC Seeks Shareholders' Consent To Create 25 Million Shares

AMC Entertainment has revealed that the company is seeking consent from its shareholders to create 25 million more shares.

The company's CEO Adam Aron made this known on Thursday night in an episode of Trey's Trades, an investment YouTube channel run by Trey Collins.

In the interview, Aron was asked a series of questions, which included being asked to explain AMC's relationship with Mudrick Capital, its outstanding share count, and the short-sellers betting against the stock.

The interview, which lasted for close to an hour, exposed Aron to all the channel's subscribers - most of which are AMC stock owners. He used the medium to bit only answer questions thrown at him by Trey Collins, but also to convince viewers/shareholders that issuing millions of new shares was in the company's best interest and would boost its stock authorization.

“If you arm us with the tool — meaning stock as the tool — to go find value-creating opportunities for AMC shareholders, we can do that,” Aron said. “If we are not armed with this tool, then you’re tying our hands behind our back and you’ll make it just that much harder for us to land some of these attractive opportunities that could benefit us all.”

This strong interest in persuading shareholders to allow the movie theatre chain to issue more stock is a result of its failure to gain shareholder support to add 500 million shares just months ago.

The company's executives postponed the shareholder meeting scheduled in May until late July to allow more of its newer investors to attend the meeting. Meanwhile, the company has been working on its strategy. The newest proposal, which was unveiled on Thursday, asks shareholders to allow AMC to issue up to 25 million more shares. If this is approved, the company would be unable to sell any of that stock until 2022.

According to Aron, the company is currently looking at several acquisition opportunities, including buying ArcLight and Pacific theater locations that were affected by the pandemic, and both purchases would be funded by money raised in stock sales.

He also said the cash could also be used to pay down debt, lower interest costs, or pay off millions in unpaid rent.

AMC has sold 20 million shares in two separate deals in the past week, generating about $800 million worth of cash. The first transaction involved Mudrick Capital, which paid over $230 million for 8.5 million shares of the company. On Thursday, AMC also disclosed that an additional 11.5 million shares were sold for $587 million.

This stock sale led to a trading frenzy for the stock on Thursday. The company's shares closed down nearly 18% at $51.34. 

20 million shares were initially intended to be given to AMC’s upper management team, but the company decided to sell the stock to strengthen the company, according to Aron.

“Between those two transactions we raised over $800 million of cash, not to line my pocket or anybody who works at AMC, but to put that money in the treasury of AMC to strengthen AMC and let AMC do more good things, to grow the company,” he said.

Aron said AMC Entertainment had been using stock sales to raise funds for months and without these additional shares, the company would have been thrust into bankruptcy.

He used the sale of 200 million new shares in December, which raised about $844 million for the company as proof of this.

“That single act of diluting shares saved the company and made the company a stronger company,” he said.

AMC sold 43 million more shares in May, bringing in $428 million in cash.

“In our view, yes we were aware that we were diluting share count, but in our view that $428 million in cash greatly strengthened AMC,” he said.

In the first five months of 2021, AMC Entertainment has raised about $1.6 billion in cash from stock sales, and as I'd Wednesday, the company has 501 million outstanding shares and only about 46,000 left to issue in the future.

AMC's stock (AMC) currently trades on the NYSE for $47.91 per share.