EXCLUSIVE: AMC CEO says more meme-stock agreements are on the way.
Following its gamble on a failing gold and silver mine operator, AMC Entertainment Holdings Inc (AMC.N) Chief Executive Adam Aron said the movie theatre chain will pursue further “transformational” partnerships to leverage on retail investors’ enthusiasm.
AMC announced a $27.9 million investment in Hycroft Mining Holding Corp (HYMC.O) around two weeks ago, an odd move for a firm with over 900 cinemas throughout the globe that raised questions among market watchers.
AMC’s investment was made possible by a $1.8 billion “war chest” it obtained in 2021 by selling its stock on the open market, thanks in part to ordinary investors who helped it become a popular “meme” company.
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In a phone conversation from a limousine in Los Angeles en way to the Academy Awards on Sunday, Aron stated that AMC’s investment in Hycroft had paid off from the beginning. AMC paid $1.07 for Hycroft shares, which were trading at $1.32 last week.
“I’d like to believe there will be more third-party external M&A announcements in the future,” Aron told Reuters, “where AMC may shoot for the stars and fascinating investments with potentially good returns.”
AMC’s shares had plummeted to roughly $14 in mid-March, but had risen to more than $20 after the Hycroft transaction.
Hycroft, which had been on the edge of bankruptcy until receiving a capital injection from AMC and longstanding precious-metals investor Eric Sprott, said on Friday that it had generated about $195 million via open-market stock sales after other investors followed Aron’s example.
AMC’s investment, which includes shares and warrants, is expected to be “lucrative,” according to Aron. The contract was announced on March 15, a day after Aron was given a tour of the company’s mining facilities in Winnemucca, Nevada, not far from the annual Burning Man arts and music festival.
Some analysts questioned AMC’s investment, citing worry that it is outside of the company’s core strength and questioning if the money may be better spent repaying the chain’s debt, which reached $5 billion by the end of 2021.
“TRANSFORMATIONAL MERGERS AND ACQUISITIONS”
In the Reuters interview, Aron defended the bet on Hycroft, claiming that it was based on AMC’s own experience avoiding bankruptcy less than two years ago and that it had the backing of retail investors.
“M&A that is transformational is required. Our investor base has provided us with funds with the distinct expectation that we would… achieve interesting things with the money they have committed to us “Aron said.
He went on to say that the almost $28 million investment was little in comparison to AMC’s total cash on hand, and that the firm will continue to improve and grow its core business. He mentioned AMC’s recent purchase of former Arclight and Pacific movie theatres, as well as the company’s ambitions to add additional premium screens to existing theatres and pay off some of its debt.
Hycroft, according to Aron, is a well-capitalized corporation that just had a liquidity difficulty similar to AMC’s. Aron’s confidence was boosted by Sprott’s engagement, he stated.
“While the Hycroft venture is a long way from home,” Aron said, “it does depend on a basic ability of our organisation to analyse balance sheets, raise finance, and solve liquidity difficulties.”
FEEDBACK FROM SHAREHOLDER
New collaborations won’t be as out of the ordinary for AMC, according to Aron, who cited the company’s recent decision to introduce a co-branded credit card and its effort to offer branded popcorn at retail locations as examples.
The unifying denominator, he noted, would be shareholder input. He now tweets practically every day and has over 2,500 AMC retail investors following him on Twitter.
Since April, Aron’s tweets have been seen more than 200 million times, he claims. He also said that he has held advance screenings of films for some of these investors, and that he plans to conduct a dozen more this year. AMC now accepts questions from individual investors as well as securities experts on earnings calls.
This is a departure from the typical methods of interacting with institutional shareholders, such as conference calls and road shows.
“The necessity to interact with shareholders is not different. What’s different is who owns the company “Aron said.
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