If the ATM offering is priced at the current share price, and the company plans to just sit on the cash that it raises, the share price won't move much. Reason being: even though your shares are diluted, the company's total valuation increases (bc of the extra cash it just raised). Smaller piece of a larger pie == same value.
However, AMC's offering was far from this ideal scenario. Instead of sitting on the cash raised, they're burning through all the cash they're raising just to keep the lights on. So, shareholders experienced dilution without any increase in company value. In a sane market, you'd expect share price to decrease by the dilution percentage. The fact that this hasn't happened (combined with the fact Cinemark's share price is still half of its pre-pandemic levels) should worry anyone with a long position.
It’s in the same class as any tech ipo imho.
This gives some insight on where the company was at pre-pandemic:
https://www.hollywoodreporter.com/news/amc-theatres-quarterl...
But in general, I think there’s good evidence that non-box office releases depress overall revenue (Mulan). Big studios want to be in theaters.
It’s not in the movie industry’s interest to let AMC fall, and AMC and all the pandemic hit industries are going to have to run a lean business to overcome the debt. In the above article AMC said they didn’t want to run ads (non-trailer) before the movie - well, now they will have to. There’s a lot they can do.
They seem like obvious plays to me.
I do buy this.
> It’s not in the movie industry’s interest to let AMC fall.
But, I don't buy this. AMC going bankrupt doesn't mean theaters go away. In all likelihood, AMC would live on as a new corporation after paying out creditors in the bankruptcy process.
An AMC bankruptcy actually seems like a best case scenario for the movie industry. After relieving itself of debt, AMC can afford to lower prices (due to a lower cost structure). And, lower prices means more ticket sales and more studio revenue.
> In the above article AMC said they didn’t want to run ads (non-trailer) before the movie. There’s a lot they can do.
Definitely agree here, but all these opportunities existed prior to the pandemic. So, I'm wondering how you can justify the appreciation in valuation over this period. Was AMC just severely underpriced prior to COVID?
