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From theater closures to credit defaults, AMC's wild year

To say the world's largest theater operator has had a tough year would be an understatement.

SNL Image
SNL Image

Before 2020, AMC Entertainment Holdings Inc. was fighting for investor interest in a mature industry challenged by new entertainment options. Amid the pandemic, the 100-year-old exhibitor has been battling for survival.

Prior to the start of year, AMC's stock had already been struggling. The company's shares eroded by more than 40% in 2019 as its new subscription strategies ate into profitability and studios such as The Walt Disney Co. announced streaming platforms. That downward pressure escalated in 2020 as the pandemic hit, forcing theater closures. All told, AMC has seen its market capitalization cut in half since the start of 2019, falling from $1.33 billion on Jan. 2, 2019, to $619.8 million on Sept. 18, 2020.

AMC shares cratered in early March as the scope of the pandemic and its impact on consumer behavior became fully understood. While the broad market also took a hit, with the S&P 500 dropping 34.4% between Feb. 20 and March 18, AMC plummeted, down 68.2% in that time period.

With some analysts warning that the exhibition business "could get a lot worse before it gets better," the March 17 news that AMC would close all its theater locations actually seemed to buoy investor sentiment. AMC shares jumped 35.9% between March 17 and March 19 in volatile trading.

Generating essentially no revenue and operating under a heavy debt load, the company then entered what executives would call "the most challenging quarter in the 100-year history of AMC." CEO Adam Aron publicly appealed for liquidity and federal aid.

AMC saw its next significant stock-price gains in late April when it secured that liquidity with a $500 million note offering. At the same time, AMC parent company Dalian Wanda Group Co.Ltd. publicly dismissed the threat of bankruptcy. Shares climbed 55.7% from the end of March through April. Rumors of a potential acquisition by Inc. continued to keep the stock afloat, helping drive shares up almost 30% between May 8 and May 11.

In May, the company continued to engineer its balance sheet, engaging in a debt exchange that amounted to a default from an S&P Global Ratings' credit ratings perspective.

AMC shares wobbled as it pushed back an opening date, largely in response to repeated delays by Disney and AT&T Inc.'s Warner Bros. for the debut of tentpole titles "Mulan" and "Tenet." However, a return to business increasingly seemed in the cards, and investors seemed pleased with the Aug. 3 completion of AMC's debt exchange, in which it restructured $2.6 billion in loans.

Those developments seemed to offset Disney's announcement that it would debut "Mulan" on its Disney+ streaming service, largely forgoing the traditional theatrical window. By Sept. 2, with theaters dusting off their velvet curtains for the Sept. 4 wide debut of "Tenet," AMC shares had recovered and even gained on March 1 levels.

But 2020 has not cut AMC many breaks, and its highly publicized return to operation with "Tenet" was no exception. The film opened to a disappointing $20.2 million stateside, with Variety reporting the three-day weekend total at just $9 million. Warner Bros. did not seem enthusiastic about that result, saying that it would postpone the debut of its next tentpole title "Wonder Woman 1984." Universal Pictures followed suit with a delay for "Candyman."

That leaves October with no major blockbuster debuts to support AMC's second-half earnings, and reports are circulating that other tentpoles, like Disney's "Black Widow," could also get pushed back. In turn, AMC shares have again trenched in September, down about 20% from a high point on Sept. 2, compared to a decline of less than 6% for the S&P 500.

All told, the stock is down more than 21% year to date as of market close on Sept. 18. The S&P 500, by comparison, is up almost 3% over the same time period.

CFRA analyst Tuna Amobi expects the company to report consolidated revenue of about $1.91 billion in 2020, "a sharp decline of about 65%, largely due to the Covid-19 disruption."

He expects things to improve in 2021, however. Assuming a rebound in attendance, Amobi projects revenues of about $4.21 billion in 2021, "fueled by admissions and food/beverage revenues." By comparison, AMC reported total revenue of $5.47 billion in 2019.

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