Investing in AMC Entertainment comes with the promise of free popcorn, special screenings, and the possibility of losing all your money.
This latest part is a warning that the movie chain and its lawyers made in a regulatory report on Thursday announcing its intention to sell more than 11 million shares to a market dominated by frenzied retail traders.
While companies often use cautious language when offering shares, the scope of AMC’s was uncommon. He acknowledged that stocks are at the mercy of the retail mania, and fundamentals play a small role in determining valuation.
“We believe that recent volatility and our current market prices reflect commercial and market dynamics unrelated to our underlying business, or macroeconomic or industry fundamentals, and we do not know how long these dynamics will last,” AMC said in its presentation on Thursday. “Under the circumstances, we caution you not to invest in our Class A common shares unless you are prepared to risk losing all or a substantial portion of your investment.”
The theater chain revealed that it plans to capitalize on the rally by selling up to 11.55 million shares to trim its debt load and finance future acquisitions. The tone in Thursday’s presentation is completely different from his announcement the day before, when he said he would offer retail shareholders special perks as a reward for their loyalty.
It’s “very unusual,” said Lawrence Creatura, PRSPCTV Capital fund manager. “But, they communicate the obvious. It’s like saying, ‘Be careful cliff jumping because there is a force called gravity and you could get hurt.’
While AMC shares tumbled more than 30% at the start of trading Thursday, they are still up more than 2,000% since the beginning of the year. This would be the company’s fourth share sale in 2021.
“When a company asks to sell more than 11 million shares, you would not expect to see that kind of statement related to the offering,” Paul Hickey, co-founder of Bespoke Investment Group, wrote in a note.
With its recent share price of about $ 60, AMC could raise $ 693 million as part of its offering, Hickey said. To put things in perspective, AMC’s total market value in early 2021 was about $ 434 million.
