A B. Riley analyst says AMC Entertainment (NYSE:AMC) is now safe after the company’s recent stock sale.
AMC Entertainment was able to raise $325 million in brand new equity according to the company’s latest report.
AMC raised approximately $325.5 million of new equity capital through the sale of 40 million shares, before commissions and fees, at an average price of approximately $8.14 per share.
“The Company intends to use the net proceeds, if any, from the sale of the Common Stock pursuant to the Equity Distribution Agreement 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,” it said in a filing.
B. Riley analyst Eric Wold has given AMC Entertainment a ‘neutral’ rating with a $45 price target.
He believes that management should continue to use the equity sales to pay off debt amid the uncertainty of the Hollywood strike and what that could mean for the movie industry.
However, when there is a conclusion to the strikes, Wold says the company could use the cash to buy new movie theaters and diversify growth strategies, reports Barrons.
“We believe these proceeds not only provide an increased near-term liquidity safety net while the lingering Hollywood strikes potentially put the 2024 film slate at risk but also provide an opportunity for the company to reduce the principal balances for the higher interest rate debt scheduled for maturity in 2026 and beyond,” Wold wrote.
“The completion of this ATM equity offering significantly boosts AMC’s cash reserves, addresses current liquidity concerns, and fortifies the balance sheet,” the company said in its news release.
Also Read: AMC Shareholders Now Look to CEO For Answers
What’s Happening with AMC Entertainment?
AMC Entertainment has had a major shift fundamentally, the movie theatre chain is improving drastically.
At the time of this publication, AMC is up more than +13 in the past 5-trading days.
The company has held relatively well post reverse stock split — shareholders continue to buy and hold in efforts to trigger a short squeeze.
AMC short interest has now begun to increase again after it had significantly dropped following the company’s approved proposals.
On Tuesday, AMC short interest was reported at 11.52% — however, short interest increased to 16.74% on Wednesday, indicating new short positions.
Short squeeze score also rose from 70 to 73 on Wednesday.
According to Ortex, ‘Short Score’ uses a multi-factor model that incorporates multiple short-related metrics, with a higher score indicating that the stock is heavily-shorted and has other characteristics that increase the possibility of a short squeeze occurring.
Will AMC Entertainment have a chance at squeezing again?
As previously mentioned, that will depend on whether investors are able to conjure up massive buying momentum like they did during the ‘meme stock’ frenzy of 2021.
The short interest is coming back up now, which indicates short sellers are certainly there.
Squeezing them out would require price action to move up, but this would require loads of buying pressure.
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