AMC Theatres Tries to Win Over Retail Investors With “APE” Dividend
AMC Entertainment Holdings is issuing a special dividend to thank its retail investors, but so far they don’t seem to be buying it.
Just ahead of earnings Thursday, the company announced it would issue a special dividend to investors of one AMC preferred Equity unit for each of AMC Class A common stock outstanding at the close of business on Aug. 15. The company has applied to list these units on the New York Stock Exchange under the symbol “APE,” in reference to the group of investors who have helped revive the stock, starting Aug. 22.
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“While no crystal ball can accurately predict stock market swings or volatility, the economic interests that our shareholders will have in both shares and APEs will be in a company that we believe is considerably stronger than AMC is now,” AMC Entertainment CEO Adam Aron told analysts on an after-market conference call.
Investors got a taste of that market volatility as shares in AMC dropped eight percent after hours on Thursday, as the theater chain saw increasing attendance, but reported continued losses related to its unique investment strategies.
Aron revealed on the call he held $15 million in AMC stock and around a $50 million stake in the company. “I have more than a $50 million economic stake in AMC,” Aron said, adding: “That is a powerful incentive for me to do what is right for all of our shareholders.”
In the second quarter, the theater chain reported total revenue of $1.2 billion, compared to $444.7 million in the year earlier quarter. It reported a net loss of $121.6 million compared to a net loss of $344.0 million a year ago.
Attendance reached 59 million people, up 168 percent from 22 million a year earlier. Aron cited the popularity of films such as Doctor Strange in the Multiverse of Madness, Elvis and Top Gun for boosting attendance during the latest financial quarter.
“Our Q2 2022 results, in our minds, prove once again what we have long said, that as Hollywood releases movies with broad consumer appeal, people will flock to see them at movie theatres in huge and eye-popping numbers,” Aron said.
On the analyst call, Aron pointed to a number of hit tentpoles at the box office during the latest quarter, led by Tom Cruise’s Top Gun: Maverick. “I’ve seen it myself four times now,” he added about Top Gun: Maverick, before as during earlier analyst calls taking aim at critics of AMC’s recovery strategy, whom he referred to “profits of doom.”
“To the naysayers, who foolishly have been predicting a secular decline of theatrical exhibition, well, all I can say is you’ve seen my feisty hashtags on Twitter. You know what I say,” Aron said. But the AMC Theatres head warned of a box office slowdown for Hollywood summer releases at the local multiplex in the current quarter.
“Things will slow for several weeks. Don’t expect too much of us for all of Q3,” Aron added, before pointing to an expected strong fourth quarter, with Hollywood titles like Black Adam, Amsterdam and the sequels to Avatar and Black Panther.
Aron also discussed on the call the company’s recent $28 million stake in mining company Hycroft Mining, which due to “market price volatility” impacted the company’s earnings as AMC wrote down the value of the investment by nearly $10 million.
“We have every confidence that our Hycroft investment will pan out, excuse the pun, to be quite lucrative for AMC,” Aron said as he touted one of the company’s latest moves to diversify into alternative revenue streams away from movie exhibition.
In early 2021, AMC became a popular stock among retail investors, after the company appeared close to bankruptcy amid the pandemic fallout at movie theater chains. The stock surge helped the company strengthen its financial position, as executives seized upon it to sell shares and repurchase debt.
While the initial stock momentum has faded (shares have climbed 30 percent in the past three months, but fallen 43 percent over the past year), AMC has continued to use the runs to make a series of strategic investments to bolster its finances, which included the $28 million investment in Hycroft Mining.
In the months ahead, Aron said July was a big month for the company, with attendance in July 2022 hitting the highest number of guests in the company’s U.S. theaters since December 2019 and preliminary food and beverage numbers for the month marking the “biggest single-month figure at our U.S. theatres in our company’s entire 102-year history.”
During the call, Aron argued Hollywood had turned thumbs down on streaming platforms as consumers returned to the local multiplex and major studios realized how much money could be made with exclusive runs for their titles in theaters. “I believe that you take all this together, and Hollywood is turning away from streaming, Wall Street is turning away from streaming and Hollywood is coming back to theatrical exhibition,” he insisted.
Aron also looked ahead to next year as he predicted a continuing box office recovery. “Our current internal forecast is that the 2023 domestic box office, the basic metric suggesting the health of theatrical exhibition both in the U.S. and globally, will be billions of dollars larger than that of 2022. We look forward to Q4 of 2022 and calendar year 2023 with glee,” Aron said.
