AMC Theatres CEO Defends Heavy Share Dilution to “Save the Company”
by Etan Vlessing | HollywoodReporter.Com
Troy Warren #business-all
Adam Aron in an SEC filing defends move to increase its authorized share capital, pending shareholder approval, following his stock’s recent Reddit-driven rally.
AMC Theatres CEO Adam Aron has defended the exhibition giant’s heavy stock dilution as necessary to save the company from going to the wall amid pandemic-era theater closures.
“Had we not had the ability to put those 300 million shares in the market, our company would have collapsed financially, and the share price would have gone to zero,” Aron told the YouTube Channel program Trey’s Trades on April 14 during an exchange that was publicly revealed by parent AMC Entertainment Holdings in an SEC filing Monday.
Aron was recalling raising new cash by putting around 300 million shares in the market between Dec. 14, 2020, and Jan. 26, 2021. “Any talk of an imminent bankruptcy for AMC is completely off the table,” Aron said on Jan. 25, just ahead of Reddit Wall Street Bets group starting to hype stock in AMC Theatres, which quickly had its value skyrocketing.
“Prior to the Reddit rally, the so-called Reddit rally, our share price tripled,” he added during his appearance on Trey’s Trades, hosted by Tremayne Collins, as AMC Theatres stock continued to defy gravity during the COVID-19 crisis. “… Yes, we diluted the stock, but we did it smartly for a good cause, which was to save the company. We did it at the right time. We did it at the right price and actually caused our share price to soar,” Aron added.
To capitalize on that share price surge, AMC Entertainment in a March 19 SEC filing proposed to authorize another 500 million shares, a move that requires shareholder approval via a current proxy vote whose results will be revealed May 4. “If you give us the flexibility to use those shares when it make sense for you, the shareholder, that’s when we’ll use them and not before,” Aron pledged during his YouTube Channel appearance.
He added share dilution will only occur when the authorized shares are issued, and AMC will not issue any of the potential 500 million additional shares during 2021. He added the increase in authorized share capital aimed at long-term flexibility and shareholder value, including possible acquisitions or debt reduction down the road.
On Monday, stock in AMC Theatres was trading up 32 cents, or just over 3 percent, at $9.65. That compares to a share price of $4.96 on Jan. 26, and a spike of $19.90 on Jan. 27 spurred on by the Reddit rally.
April 19, 4:40 p.m. This article has been corrected to provide context on AMC Theatres seeking from shareholders approval to increase its authorized share capital. It incorrectly stated AMC sought to issue 500 million new shares on receiving shareholder approval to do so.