Are AMC Going BankruptAre AMC Going Bankrupt

Theater company AMC Entertainment Holdings plan to sell up to 40 million shares of common stock. The decision has been taken in an attempt to “bolster liquidity, to repay, refinance, redeem or repurchase its existing indebtedness (including expenses, accrued interest and premium, if any) and for general corporate purposes.”

The news has sent AMC shares plummeting 20% since market opened this morning.

So, Are AMC Going Bankrupt?

Today, investors must ask the questions: are AMC going to recover? Or is bankruptcy on the cards?

There are three key reasons why we at Footnote think AMC is doomed to bankruptcy. First, the Hollywood writers’ strike will have a significant impact on the company’s revenue over the next two years. Avatar 3, 4 and 5, and Avengers 5 and 6, are just five films of 36 movies that have been pushed back as a result. Each is expected to reach $1 billion or more at the box office. A catastrophic blow for AMC.  

Another risk for AMC is streaming. While blockbuster films such as Barbie and Oppenheimer have proven that cinema is not dead yet, these are just two of many. For others, like Elemental or Indiana Jones, box office numbers disappointed. That’s not all down to streaming, but it is a factor, and one that will continue to take a sizable chunk of revenue from AMC every single year.

Finally, debt remains a key stumbling block for AMC. Current levels stand at $5 billion. This means that, even after today’s news, AMC are nowhere near the green. This can only get worse. As AMC continue to refinance debts, interest payments will rise and losses will compound.  

Final Thoughts

We at Footnote will not be buying shares of AMC anytime soon. The risks are too numerous and too substantial to ignore. A sinkhole of debt, delayed movies, and the continued rise of streaming will overrun AMC. Try as they might, today’s news will not change the inevitable.

Are AMC going bankrupt? We think it might just be around the corner.

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