AMC Entertainment Holdings Inc. (NYSE: AMC) was scheduled to seek approval from stockholders to issue another 25 million shares in its upcoming annual meeting. On Tuesday, however, it withdrew the proposal, pushing the stock up by 3% in premarket trading.
In his tweet, CEO Adam Aron of the movie theatre chain said on Tuesday:
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“It’s no secret I think shareholders should authorise 25 million more AMC shares. But what YOU think is important to us. Many yes, many no. AMC does not want to proceed with such a split.”
Did it make sense for AMC to raise money via stock offering?
Aron’s tweet also confirmed that AMC Entertainment would not make any similar requests to shareholders in the back half of 2021. Previously, the company had expressed plans of raising money via stock offerings to fund potential acquisitions, reduce interest costs, minimise debt, and pay rent.
“If the corporate proceeds were going to be used to justify the valuation by expanding the business or branching out into other businesses, then it makes sense to raise money when you can,” said CNBC’s Joe Kernen on “Squawk Box”.
CNBC’s Melissa Lee, however, highlights that AMC Entertainment is a technical trade, “fundamentals have nothing to do with the story.”
“As a CEO, that’s weird, because you never know if these retail investors are long-terms; do they care about the fundamentals of AMC or do they just want to squeeze the shorts, make their money, and leave,” Kernan added.
AMC shares are up about 2,600% on a year-to-date basis
AMC Entertainment took a massive hit last year as the Coronavirus pandemic pushed its theatres into shutting down. In 2021, however, it became a meme stock, with Reddit investors fuelling unprecedented rallies in recent months. AMC shares are now up about 2,600% on a year-to-date basis, thanks to the retail traders, which now make up more than 80% of its investor base.
The market cap of the Kansas-based company has consequently ballooned to over $25 billion.
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