This story has been corrected to note that AMC projects that it generated $216.5 million in cash for the final quarter of 2021, rather than burning through $216.5 million in cash.
That’s what we assume one would have heard on Tuesday if within a few city blocks of AMC Entertainment’s AMC, -4.60% chief executive, Adam Aron, who must have been watching the company’s stock bounce back as much as 13% on news that the cinema-chain operator expects to really turn a pandemic corner on its revenue, projecting that it pulled in $1.172 billion for the final quarter of 2021, up rather dramatically from $162.5 million for the comparable but more COVID-marred period in 2020.
And why are we working on the assumption that Aron was shrieking with glee at the big equity rebound? Because even AMC’s loyal army of Reddit “Apes” couldn’t have been as thrilled as Aron to see the stock surge back above $15 a share after dropping from more than $50 as recently as September.
See, unlike the retail investors who enjoyed the “Mother Of All Short Squeezes” last year and are now clinging to its memory, Aron needs AMC’s stock price to stay as healthy as possible as he tries to untangle the Gordian knot that is AMC’s more than $5 billion debt.
Aron has been very public in his view that the debt is an issue, even with the stock still up more than 500% off pandemic lows — which makes sense considering that AMC’s debt-to-equity ratio is a bright red flag at -6.65 — and he has told anyone who will listen that he is ready to aggressively refinance the heck out of his massive load.
And, with that ratio, Aron could attract the interest of distressed-focused funds, which is never the comfiest place to be as a CEO.
As we’ve written here before, Aron’s best chance might lie in a convertible bond issue, which would allow him to end run his own board and the retail investors who own his free float to basically issue shares via a deal with someone who would take on some of that debt in exchange for some brand-new AMC stock.
Considering that AMC’s share price had dropped almost 40% going into Tuesday’s trading, it would have been a lot harder for Aron to swing any such deal, but the sign of life from AMC’s ticker, and the strong signal that AMC’s actual business is coming back to life, and he might now be able to sell someone on taking a flyer on everyone’s second favorite meme stock.
But if Aron is jumping up and down, he may need to pause things for a second.
Not only did AMC’s stock fall back a lot in afternoon trading Tuesday, but AMC also disclosed that while it generated $216.5 million in cash for the most recent quarter, that still left AMC on the wrong side of the free cash flow line for 2021. Aron is going to have to keep trimming spending to make his revenue look bigger going forward if he really wants to attract the best possible refinancing deal.
Speaking of AMC’s debt, we talked to Wedbush’s Michael Pachter about the whole situation on the latest episode of MemeMarkets:
Also no longer at rock bottom: Robinhood
Shares of Robinhood HOOD, -4.10% posted an early gain of more than 2% on Tuesday, continuing a nice turnaround from falling below $10 a share on Jan 28.
In a note reiterating his buy rating on the stock, Mizuho analyst Dan Dolev answered investors wondering whether Robinhood had bottomed out already. Dolev’s answer: “Yes, indeed,” thanks to the fact that some of Robinhood’s key metrics appear to be stabilizing and therefore shouldn’t get any worse.