A day after AMC Entertainment Holdings (NYSE:AMC) announced an investor outreach program that sent its share price skyrocketing, CEO Adam Aron held a video call with retail investors. Aron expressed a desire for the company to sell 25 million additional new shares; this news could trigger more volatility for the stock in the near term.
The stock fell on Thursday following news that the company planned to sell 11 million additional shares, and it looks like management is angling for an even larger share offering. If such a move goes through, AMC could raise substantial capital — and potentially pave the way for it to explore growth opportunities outside of the movie-theater space.
Following recent explosive gains for the company’s stock, AMC now has a market capitalization of roughly $26 billion — up more than 5,300% year to date. Despite theaters in many territories now reopening and box office receipts showing signs of early stage recovery, the business’s outlook remains somewhat bleak.
Issuing new shares would likely have the effect of pushing the company’s stock price down, but it could ultimately be in AMC’s best interest. Despite the risk of substantial stock dilution, Aron pitched the new share offering to investors as a move that would create value. In yesterday’s video call, the executive said, “If we are not armed with this tool, then you’re tying our hands behind our back and you’ll make it just that much harder for us to land some of these attractive opportunities that could benefit us all.”
However, a recent filing from the company also recommends that investors exercise caution with its stock — highlighting recent pricing volatility and the potential for huge losses. Those without very high risk tolerance should probably steer clear of the stock for now.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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