2nd Equity Raise This Week from AMC (AMC) 'A Positive' - Macquarie

Macquarie analyst Chad Beynon took a positive spin on AMC's (NYSE: AMC) second equity issuance this week, with news this morning it will sell 11.55 million more shares. On Tuesday, AMC sold 8.5 million shares to Mudrick Capital for $230.5 million.

Beynon said given the Reddit-mania and share rally, "we believe AMC’s equity raises are positive moves for the company (compared to normal equity dilution, which is generally viewed to be stock price-destructive)."

The analyst calculates that AMC now has ~513m shares outstanding, almost 5x the number of shares in 3Q20. At $50 per share, this suggests a market cap of ~$25.65 billion.

Further, the company is seeking shareholder approval for a 500 million share authorization, although management has noted that it wouldn’t issue any of that stock in 2021.

"In our view, additional capital raising should be viewed as a positive if allocated in the right place, like debt reduction or paying down deferred rent, but we acknowledge that shares are no longer trading off of fundamentals," the analyst added.

Despite the positive view on the equity raise, Beynon reiterated a Neutral rating and $6.00 price target on AMC, suggesting about 88% downside to current levels.

"Despite shares now up 2,850% YTD (as of 6/2 close) vs the SP500 of 12%, AMC balance sheet is still hampered by nearly $5.5bn of debt as of the end of 1Q21 and our projected leverage of 12.3x by YE22," the analyst commented.

For an analyst ratings summary and ratings history on AMC Entertainment click here. For more ratings news on AMC Entertainment click here.

Shares of AMC Entertainment closed at $62.55 yesterday.

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