AMC - Final Gasp Of Breathe Before Its Demise

[Shadowstars]

My 2nd only DD on this forum and this one is a bit more of a formal format with links to data/sources than my previous one. Hopefully this one is better than my first one and hopefully someone finds it useful.

Now without further ado… Here you go!

Attached in pics below are the main figures I pulled from the SEC EDGAR filings for AMC financials along with links.

Q3 2022 AMC

Q2 2022 AMC

Q1 2022 AMC

Excel Pic #1
What I did in this picture is put it into Excel some of the more relevant things for me in my analysis.

If you notice, AMC has been burning 228.6mil per quarter. 685.9mil over 3 quarters (9 months) or roughly 76mil per month.

Now I also added Domestic Box Office Gross figures in that table but here are the sources.

Q1 2022

Q2 2022

Q3 2022

*edit fixed the q3 2022 not showing

Q4 2022 Pending

Excel Pic #2
So let’s tie up all the Domestic Box Office Gross Figures and get some context.

Q4 currently is at 1.37bil. Q2 was 2.32bil. Meaning roughly 950mil is needed in roughly 13 days to hit Q2 figures. Now if you look at past performance, 950mil in a month let alone 13 days is extremely tough.

Avatar 2 which was hyped up to be the savior of AMC’s Q4 had a pretty slow opening. To put some context to their performance here is a chart.

Excel Pic #3

134mil opening weekend is far below some of the recent big hits.

Now you don’t need to be a genius to figure out that as movies go on after their opening weekend, they tend to drop down in box office gross as the market of movie watchers for that movie is saturated.

But if we refer back to Excel Pic #2 I did a rough calculation. If the remaining 13 days for the domestic box office used Friday’s performance (opening day of Avatar 2) for every single day for the rest of the month, what would the numbers look like?

Well my calculation showed that domestic box office gross would be down about 9% vs Q2.

Now if we refer back to Excel Pic #1, we know that AMC had net loss resulting in a cash burn of $121mil. We can guess that domestic box office will be down at least 9% vs Q2 if not significantly more. So that means as a result AMC’s revenue will also be down.

Don’t get confused if movies do really well overseas though. Because almost 80% of AMC’s revenue comes domestically and markets like in China, Japan, Korea, etc… won’t help AMC.

So Q4 performance for the box office is looking to be at least 9% down from Q2 and maybe at best 10% above Q3 2022.

If we average the Q2 and Q3 domestic box office figures, it comes out to 2.124bil. This is close to what my previously calculation would come out to if domestic box office were to avg roughly 57.6mil per day everyday for the rest of the year.

Now my confidence in why that 57mil figure won’t be hit on a daily rate besides just typical box office decrease week over week is also due to the fact that Dec 2022 releases arent that strong.

Attached below are the major releases lined up for the remaining part of Dec 2022.

To put some past performance into perspective, Puss in Boots original back in 2011 did $92,175,928 in 15 days but it will only be out for 11 days for the Q4 2022 count. And early projections of Babylon is only showing roughly 75mil-100mil for its opening.

Now let’s factor in AMC’s liquidity status especially since AMC gave an update in regards to their APE dilution and estimated liquidity situation.

12/19/2022 8-K Filing

They state that they would have in between 725-825mil cash/cash equivalents + undrawn revolving credit facility which is 211.2mil.

So correct me if I am wrong but I interpreted that as saying that minus the credit facility they would have between 513.8mil to 613.8mil of cash. And that would be all after the current dilution to date which added 153.2mil cash minus fees/commissions.

Now remember AMC ended Q3 2022 with 684.6mil cash on hand. So best case scenario thats 70mil less cash vs Q3 even after all that money raised. Meaning cash burn would’ve been in the 200-220mil range.

So that was Q4 when AMC was hyped with big movie releases such as Avatar 2 and Black Panther 2.

Now that is all Q4 2022. Let’s look towards the next quarter in Q1 2023.

I pulled up some of the bigger movie releases and notices coming out in Q1 2023.

I highlighted the ones I knew of and could get some coverage.

Q1 and Q3 for movie theatres are known to be pretty slow.

Here is a consolidated table of financials for AMC 2018 and 2019.

You see that Q1 and Q3 are noticeably slower and with less attendance than Q2 and Q4. This is a typical industry trend where things slow down. Notice that in pre-pandemic 2018 and 2019 Q1, AMC lost 120mil+ in Q1 2019 and only had 17.7mil profit in Q1 2018.

Movie releases are still slow to come out. Even the CEO stated that industry avg to produce movies takes about 2-3yrs. If movie production started to ramp back up to normal in the later half of Q3 2021, that means movies at the soonest won’t be really hitting the theatres in force until later half of Q3 2023.

So from current box office figures AMC is likely to have burned $200mil+ in Q4 if it were not for APE dilution. 125.9mil APE out of 425mil have been sold already which is nearly 30% of total authorized so far. However, APE is currently trading at around $0.67 per share meaning not much more meaningful money will be able to be raised.

Now Q4 2022 which was hyped to be the best quarter yet falls flat on its face and Q1 2023 is expected to be another slower quarter, you could expect another $200mil+ cash burn quarter unless there is a significant dilution of even more ape. And even at that they would have to sell alot to cover the losses.

Using the avg Q4 2022 cash liquidity that AMC states minus the credit facility which would be 563.8mil approximately, if no APE dilution occurs and AMC incurs another $200mil+ cash burn quarter, their cash on hand would drop to $363.8mil.

Now remember, under AMC’s debt covenants, they need to have a minimum cash liquidity requirement of no less than $100mil. If they breach that debt covenant then all hell could break loose.

Now at the same time, AMC also announced that they are acquiring 13 of Arclight’s former theatres.

So operational costs will be increasing, AA also announced on Q3 earnings call that CapEx will be increasing because they are installing new laser projectors, Fed is increasing the interest rate and they have some seriously nasty loans at high rates they need to deal with.

Now this still doesn’t count for all the deferred rent and lease payments they got a reprieve from due to the pandemic.

While some hopium/AMC bulls will think that AMC has until 2026 to even worry about their debt of which 3.3bil is due in 2026, I see no way for AMC to even make it out of end of 2023 with some sort of miracle occurring let alone having to raise enough money in 2024/2025 for them to cough up 3.3bil when their debt is due.

So I think running into Q4/FY2022 earnings for AMC, the writing is already on the wall and the stock price will only continue to go down further as lack of movie releases, the lackluster performance of movies in theatres now all drag down AMC.

AMC credit cards, popcorn in grocery stores/doordash/uber eats, zoom conference rooms in theatres, etc… all these things are for naught.

This is one shit company that expanded waaaay too much starting with initial domino drop when it did the carmike cinemas acquisition and odeon acquisition. They banked too heavily on thinking the movie industry would suddenly explode for years on end without having a sure way to really finance and pay off all that money they were burning.

Meme stock retail traders were able to help pump the stock and helped it stave off initial bankruptcy when the pandemic hit along with some nice rent/tax/lease deferments but as those start to run out and as macro conditions start to change for the worse especially if we turn more heavily into a recession, it does not bode well for movie theatres especially AMC.

So TLDR what was the point of this? My point is that the short thesis for AMC is still well and alive. AMC currently has been bleeding hard lately but I expect a minor bounce back up due to technicals since it seems to be nearing a pretty extremely oversold territory on the daily chart.

A push to $5.5-$6 range is what I would think to load up on Feb puts to ride AMC down to what I think would be the $3.75-$4 range in the upcoming weeks when the news of poor movie showing continue to hit the news.

[d_r_a_x_x_y]

AMC generally follows demark reversal signals on the daily quite accurately.

[Shadowstars]

While all the previous numbers and figures hold true, there has been some interesting developments in regards to its cash position along with the shares of AMC and APE. I will look to update this over the weekend.

But quick TLDR is pending vote for approval for the following: RS of AMC 10:1, Increase authorized shares to allow for conversion of APE into AMC, Allowing new AMC to have same dilution without advanced shareholder approval that APE had.

[Shadowstars]

So a few things to update in regards to the situation.

The current total outstanding shares would be around this provided the deal finalizes with Antara Capital.

Link to AMC Press Release for Antara Capital deal.

So total AMC+APE combined would have over 1.41billion shares outstanding.

Antara Capital would have 257.6million shares of APE which would give them approximately 18% ownership of AMC.

With the reverse stock split of 1:10, that would take the total outstanding shares down to 141million shares approximately.

As a part of the deal there is going to be a special shareholder’s meeting that requires the shareholder approval for the following 3 proposals.

The 3rd proposal is what I find intriguing. If you have been following the AMC saga, the creation of their preferred class shares aka APE and APE units, was a vehicle for share dilution/raising cash. AMC currently has 40mil shares of the preferred to dilute to which it could result in up to 4billion APE units. (1 unit = 1/100th of 1 preferred share).

I am not sure as to what happens to this authorization if the vote is approved to merge APE back into AMC.

However, APE had that authority to basically to dilute whenever it wanted and now the vote is coming for the potentially re-combined AMC+APE to get that same type of authority to dilute whenever.

From the company standpoint I see this as a necessary requirement because the company is not able to effectively raise capital to stave off short term liquidity issues due to their high rate of cash burn (150mil+ per quarter currently, 220mil using my projections).

With this special shareholder’s meeting occurring and with Antara having to vote in favor of the proposal as per the agreement, I see it extremely unlikely that the votes are there to oppose the board’s proposals.

With the recent injection of cash I would forsee AMC to end Q4 2022 with about $690mil of cash on hand. Q4 2022 Box Office is coming in really low (lower than Q3 2022 and lower than even Q4 2021) and Q1 2023 seem to be lacking any really big blockbuster hits.

So I could see that dilution would be in the near future sometime in the end of Q2 2023 when AMC’s cash liquidity once again drops to sub $500mil *provided things move at its current trajectory.

Now the whole share price movement that is occurring between AMC and APE is also interesting.

AMC and APE if they do recombine are going to be converted as 1:1. AMC and APE both hold equal voting power/rights yet the price between to two is still quite large. As we get closer to the actual vote, I think that shares will continue to try to move closer to each other. So AMC will continue to drop and APE will continue to rise.

Now, negative news could come out about the company in the near future because you can see how the box office is doing pretty poorly compared to last year same quarter and even the last 2 quarters of the year. Avatar 2 has been muted domestically even though it is doing decent worldwide.

Disclosure: I hold AMC puts for Jan 2023 and used the callout function.

This little tidbit is for a bit later if things don’t change too much materially but I pulled initial analyst ratings and projections for AMC’s Q4 2022/FY2022 earnings and they were projecting AMC to do about $1.2billion in revenue for Q4. With Q4 domestic box office being so far down and being slower than Q3 2022, I forsee AMC having revenue under $1billion and closer to about $930million.

This would be a massive earnings miss on revenue (approx 20%+) and EPS which was previously thought on avg of -0.15 if just doing the R/S calculation would result in only -1.09 but could be more along the lines of -1.56 which would be a 30%+ miss on EPS too. That if the stock followed fundamental news could send things really going down further as concerns continue to mount about its inability to recover and pay down its debt in a positive cash flow manner and can only do so with continued dilution of company stock.

[Rengoku_Spirit]

Is it me or AMC current price lvl might be a good entry point? This is not based of any forensic DD made but I feel like these meme stock, in particular AMC seems to have a bullish run after a gulagish phase…company aint going anywhere for now and $2.5 seems kinda low.

Maybe chart TA can show something ?

[Ridn2lo]

I don’t how bullish it can be that very soon you’re going from 520 million shares to 1.5 billion. Almost a 90% dilution.

[Shadowstars]

Pretty sure there was a registration for the additional dilution of up to 25mil shares or something after they do the conversion of AMC + APE and their reverse split 10 to 1.

[Rengoku_Spirit]

[The_Ni]

AA might actually pull this one off. Wrote a thing on AMC’s debt for Reddit, tl;dr - washing away the shareholders may actually make debt sustainable where Ch11 is no longer needed.
https://www.reddit.com/r/amcstock/comments/1c34q7c/a_discussion_on_amcs_bonds/

[Shadowstars]

All depends on if movie output continues to be strong and people show out for it

[Shadowstars]

People are far more picky with what they tend to watch and Hollywood’s trend to go “woke” led to an utter catastrophe at the box office

[The_Ni]

The writer and actor strike also did the box office a number, and this year’s box office is expected to be 8% lower than last year.

[Shadowstars]