Previously bet on as a destined for bankruptcy, AMC Entertainment (NYSE:AMC) is enjoying an uptrend. The stock bottomed at $2.00 at the height of fears the coronavirus would never end. Although the U.S. is suffering from worsening infections and casualties, the vaccine rollout brings hope.
Markets are betting that AMC and Cinemark (NYSE:CNK) will recover.
On Dec. 11, AMC secured a $100-million debt financing from Mudrick Capital Management. On the same day, it said it would sell 21.978 million shares in a private placement, raising around $80 million. AMC now has over $300 million on its balance sheet.
The movie theatre chain needs $750 million to remain viable in 2021. Although AT&T (NYSE:T) said it would launch all movies in theatres alongside streaming on HBO Max, AMC will get some of that revenue. Studios cannot afford to rely on box office ticket sales alone. The subscription model has rich margins the more sign-ups it gets. Investors buying AMC or CNK stock are betting that people will prefer the movie experience, the popcorn, and the night out than to stay at home streaming a new release.
AMC is a risky proposition. It needs more than 10-25% in movie capacity utilization. Anything below that is a continued loss for the firm sitting on plenty of debt.