When the coronavirus outbreak forced the major countries to impose a lock-down, shares of AMC Entertainment (NYSE:AMC) fell to a rock-bottom low of $1.95. That "double-bottom" pattern ended in the last week as the stock rose by 31%.
Speculation that the lockdown is easing, plus recent financing, suggests that AMC is alive and well. AMC priced $500 million of first-lien notes at 10.5%. The debt offering will help avoid the company from filing for bankruptcy as it waits out the lockdown.
Lenders and the company would prefer that the movie theatre firm continue to operate and to have a re-opening plan that brings back moviegoers. Major Holley wood studios need AMC’s solvency. So, AMC faces steep interest costs but will stay afloat. And as it re-opens, it may resume selling confectionery much to the pleasure of its customers.
Movie pass subscribers are also keen to see AMC resume its business. With few entertainment options available and large-crowd bans persisting for months after the lock-down eases, viewership at AMC should grow.
Takeaway
At a market cap of $330 million, AMC shares have a chance to bounce back as theatres reopen. Competitor Cinemark (NYSE:CNK) also raised $250 million in debt, easing liquidity concerns.
