AMC CEO Says Stock Conversion Plans Are Vital to Theater Chain’s Future

On Tuesday’s earnings call, Adam Aron says the company “has some serious liquidity issues to solve”

Adam Aron AMC Entertainment
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While AMC Theatres beat Wall Street projections with a slightly profitable second quarter and is expecting more strong earnings in Q3, the company’s top execs warned that the chain’s future would still be “in jeopardy” if its plan to raise capital through a proposed stock conversion is not approved by a Delaware court.

“In the short term, AMC has some serious liquidity issues to solve. We should not oversimplify that it will be easy to overcome the obstacles and hurdles in our path,” CEO Adam Aron said in an earnings call on Tuesday.

Thanks to multiple Hollywood blockbusters like “The Super Mario Bros. Movie” and “Guardians of the Galaxy Vol. 3,” AMC Theaters reported its highest quarterly attendance since the COVID-19 pandemic began and revenue of $1.34 billion. Net income was reported at $8.6 million — or 1 cent per share — up from last year’s Q2 loss of 12 cents per share and above Wall Street projections of a 5 cent loss per share.

Q3 is expected to be just as strong thanks to the hit double feature of “Barbie” and “Oppenheimer” as well as the surprise success of the indie drama “Sound of Freedom.” But long-term, CFO Sean Goodman warns that AMC needs the double strike shutting down Hollywood to be resolved soon and for its proposed conversion of its special APE stocks to common shares to be approved.

“If the strikes are prolonged and or our ability to access the capital markets is constrained, then our … ability to continue to take the necessary actions to strengthen our balance sheet and to ensure a full and sustained recovery may be in jeopardy,” Goodman said.

AMC has sent in a revised proposal on the APE stock conversion after a previous version was rejected last month by a Delaware judge. Aron has repeatedly said in public statements over the past few months that the stock conversion is vital to allow AMC to continue raising capital and reduce its debt load as it continues to burn cash, having reported operating costs almost as high as its revenue with $1.26 billion spent this past quarter.

“We need to be able to raise capital if we need to. The dumbest thing we could ever do as a company is run out of cash and other companies in the industry have run out of cash. And some of the armchair quarterbacks on Twitter, who give me advice every day, if I follow their suggestions, we would have run out of cash a long time ago. If I follow their suggestions now, we’ll run out of cash,” he said.

After AMC’s earnings were released prior to market open, the company’s stock saw a small bump to $5.41/share before subsiding to close at $5.09.