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AMC files to sell 11 million shares, cautions investors

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On Thursday, AMC filed to sell 11.5 million shares of its stock. In the same SEC filing, the movie chain also cautioned “against investing” in its common stock, unless investors “are prepared to incur the risk of losing all or a substantial portion” of their investment.

Video Transcript

JULIE HYMAN: But first, we got to talk about AMC, don't we? The company out with a surprise filing this morning, saying it's going to be selling 11 and 1/2 million additional shares, registering to sell them. But what really stood out to us, of course, from this filing was the language within it, and this quote in particular.

"Under the circumstances," reads the filing, "we caution you against investing in our class A common stock, unless you're prepared to incur the risk of losing all or a substantial portion of your investment." Now, it's not unusual to see sort of caveats, legalese in these types of filings. But even by those standards, this is fairly extraordinary.

Here's a bunch more shares to buy. But you might not want to actually do that-- is an interesting move to take. Again, legally, I understand why they have to say it. But it's still pretty stark, Myles, when they actually do.

MYLES UDLAND: Yeah. And you know, in addition to that-- and I would encourage viewers who are interested-- and I'm sure many already have-- I would encourage them to go read the rest of the filing. Because there are one, two, three, four, five additional bullet points of caveats on crazy things that have happened with shares of AMC and that may or may not happen to shares of AMC in the future.

But again, I think it's quite a shrewd move here on the part of management to come to market for the second time in a week when you have this kind of action in your shares. And you know, I just put a post up on Yahoo Finance that a lot of the AMC bulls think is wrong. They're telling me to read the filing. I tell you to read the filing. The filing says there are 11 and 1/2 million new shares that can be issued. It is under the April prospectus, which has thus been amended today to include the additional shares. The 43 million shares they filed to sell in April, that sale was completed in May at, I believe, $9.94 per share or something like that. That's also a filing that you can then go read.

So we have 11 and 1/2 million new shares. And in the story I have on Yahoo Finance, very simple example. We chatted about this a little in our meeting this morning. But look, if they come to market at the beginning of May-- $10 a share, 11 and 1/2 million shares. That's $115 million-- minus the fees-- that goes to AMC. They come to market at around $60 bucks a share. You're looking at closer to $700 million, $690 million. So Sozzi, that's a $575 million difference-- minus the fees-- that AMC gets to use to buy theaters that are struggling, which they suggested in Monday's filing. The company can pay down some of its debt. The company can do whatever it wants with that money.

But they were in a very dark place a year ago. And now for them to come out and basically-- just because the market has made a meme out of their name, they can go ahead and raise another couple hundred-- $500 million of capital. I mean, Sozzi, it's the thing that management teams have to do or at least think about if you are stuck in a meme market. This is basically-- not literally, but basically, for all intents and purposes, kind of free money to borrow here, right?

BRIAN SOZZI: Yeah, Myles. You and I are taking some heavy fire on Twitter the past 24 hours, especially this morning. So very interesting to watch the supporters of AMC continue. And I will note some data. You know, I mentioned-- I referenced this company called HypeEquity yesterday. I'm using this service, among many, of course-- the Yahoo Finance trending ticker page as well. But they monitor social media mentions here. And a lot of institutions, in fact, use this service and several others.

They're noting that sentiment on AMC took a leg lower-- took a leg lower, or a little more negative, after the share sale. And I know you're seeing the stock rally back here in the premarket. When the share sale hit the market, or hit the tape, or hit the news, the stock fell about 13%. You're seeing it down now about 1% in the premarket here. But sentiment is starting to turn. So it will be very fascinating to see if the stock does close the session in the green or if it opens in the green. I know I'm very much fascinated.

But Myles, you mentioned management teams. Now, we talked at length with Bed, Bath and Beyond CEO Mark Tritton yesterday while his stock was climbing 40%. Within 30 seconds of that interview, the stock was up another 10%. Nonetheless, here's what Tritton told Yahoo Finance about how he's thinking about these wild moves in his own stock.

MARK TRITTON: What this has actually forced people to do in that first round was go back and look at the fundamentals of our plan and the upside opportunity of this business, the reality check that we are going to deliver a $850 million plus of EBITDA within a three year period. That we have a great balance sheet. We have an incredible team. And we have a great strategy.

And I think when people did that, those stocks really bounced up very, very quickly. And we became differentiated. So as I said, these moments don't distract. They don't define us. But we consistently focus on that sequential growth.

BRIAN SOZZI: So you're really just seeing opposing views. You have the gunslinger that is AMC CEO Adam Aron who has taken to Twitter to essentially pump the stock up and then come out the next day and drop the hammer on investors that you noted, Myles, with the share offerings. And you have a more levelheaded executive in Mark Tritton who has extensive experience, spent many years at Target, and is more of a methodical thinker, and is unlikely to come out here tomorrow and offer 15, 20 million shares despite his stock popping. He realizes he has a strong balance sheet, and a strong company, and a recovery story to continue to tell investors, Julie.

JULIE HYMAN: Yeah, I mean, you know, I think Myles is on the other side of this in terms of companies having to examine this. I mean, one of the, I think, arguments against coming out into the market and selling shares-- maybe not in the case of AMC but in the case of a Bed Bath and Beyond or some of the other meme stocks-- is, you know, if and when the stock does eventually fall, do you end up with a bunch of pissed off shareholders who bought at the top as you were issuing all these new shares.

Now, I don't know if that's a reason for Tritton not to do it. And I also keep asking, you know-- you were listing the sort of different ways that AMC could spend this money, Myles. Are those going to add value to the company at the end of the day? I mean, I know it doesn't matter. But at some point will it? I don't know.

MYLES UDLAND: Well, I mean, I think-- OK, so I think that, all else equal, if you are incentivizing three million people who are passionate about your business to come to the movies and get them free popcorn, right-- that was the announcement yesterday morning we were talking about. All else equal, I think it's better to incentivize at least some of them to come by to spend money on a movie than to not. So there's the investment in the business that I do think is a real thing.

Now, I agree that issuing shares in an at the market offering when the stock is at a record high and the stock has more than doubled in a handful of trading days-- I agree that that is an extreme move. And I agree that for a company that, again, came to market with 43 million shares about a month ago and now comes to market with an additional 11 and 1/2 million shares-- that is an aggressive move in terms of changing their capital structure. And that not every management team is going to do that. But your stock price does allow you as a management team to do certain things and to take advantage of the market in certain ways.

And I actually think that for a company like a Bed and Bath, Sozzi, what AMC announced yesterday, which is the new AMC investor connect program-- again, the-- you sign up for the loyalty app or whatever it is. You get a free popcorn when you go as a shareholder of AMC. You know, that is a way to turn internet enthusiasts into actual paying customers.

And it's creative. It's off the beaten path. I don't know how long it's going to last. You know, for how long people are enthused about AMC as a shareholder. But I think that's an example of being creative with using buzz around your company to really drive business.

And I know that Mark Tritton and Bed Bath's team and probably the team at Blackberry and Express and some of these other meme names-- they don't want to be thinking about their stock price and how they could try to leverage the stock price and the meme nature of their stock price. But it is something that I think is hard to ignore and is at least worth exploring. Are there ways to leverage this beyond just coming out and saying, well, today is just another day. We have our three year plan.

BRIAN SOZZI: No, those are all-- great point, Myles. And they're well taken. But I will-- let me get deep here for a second. Is this morally correct for an Adam Aron, AMC CEO, to come out here, offer these shares, pump up the stock on Twitter, to do things like this. Is this someone you would want to put your money, your life savings against? Or do you want to maybe perhaps put that life savings behind a level-headed thinking executive like a Mark Tritton?

You know, I can't see-- I mean, I get traders are trading AMC and Adam Aron and doing his thing. But listen, I mean, this smells wrong to me. It doesn't smell right, Julie.

JULIE HYMAN: I don't know if anybody's putting their life savings in. I suppose maybe some people are. I don't know. But you know, one of the things I come back to, as well, is something that you examined in your morning brief this morning, Myles, which is, is this latest meme stock wave different from prior meme stock waves? And I think something you guys mentioned earlier kind of speaks to that, which is the vitriol around this.

And yes, we did get some of that in the earlier wave in January, February, right. But I think it's really interesting how nasty people are about their defense of AMC and how-- you know, we've seen this through the years with Tesla bulls as well, that God forbid anyone says a bad word or-- not even a bad word, but think critically about a situation. The knives really come out for those folks.

And Myles, as someone maybe newly the target of this, I don't know how you're thinking about what that reflects, whether it's a little bit of people bored on the internet, a little bit of thinking this us versus them mentality. I don't know. What are you thinking about that?

MYLES UDLAND: Yeah, I mean, I-- honestly, I think it's kind of normal. It's kind of normal internet stuff, right. You know, AMC-- like, there are things that come up over time. And Tesla is an example of it. Trump's a great example of it. AMC is an example of it-- that people rally to it as-- I mean, it's an ironic kind of online performance.

I actually don't think that the people that are as loyal about AMC mean it as much as they say they do online. They do have a lot of fun tweeting at myself, arguing with other folks on Reddit about who's right, who's wrong. No, this guy actually can't read. There's no way he read this filing. I read the filing. And even though, you know-- even though one side does have the truth as far as the SEC is concerned, it doesn't matter.

And I think that's fine. I think that's just the world that we live in. And it really doesn't bother me that that is a thing that's coming up. I think, really, it's-- and I wrote about this as well, suggested towards it. It's internet culture coming to financial markets. And internet culture has a very specific rhythm and a very specific cadence to it. And I think trying to make sense of it along the lines of objective truth or what would stand up in a court of law or what an editor might deem acceptable to print-- all that stuff is very old world. And that's not exactly how the logic of this is going to work.

And again, doesn't really bother me to see people all upset about this specific situation and upset about noting that this is a filing for new shares. I mean, again, it's really not that big of a deal. But-- and it's not going to be the last instance where this comes up in financial markets.

And I think that, to me, is the real takeaway here. This is the second time in four months that we have seen kind of the same playbook play out. I mean, this is also kind of happening in crypto. So really, it's the third time in four months if we do the doge thing alongside this. And I think a lot of the same energy goes there. And so, to me, the takeaway is that this stuff is a feature. It's not a bug of the market. It's a feature of the market.

And I know that the Fed haters are going to come in and say, this is because of liquidity. You know, people who hate what the government did with all the stimulus packages are going say, well, these people are bored at home, and they're getting stimulus packages. And that's why they're doing this. I mean, all that can be true-ish on the margins, sometimes. But it's really how we socialize with one another, right. We socialize, you know, through these sorts of in-jokes. And yes, I know there's money involved with AMC, but it is an in-joke of sorts and an internet based in-joke at that.

And yes, it's bleeding over into financial markets. It's bleeding into our world. And it becomes very challenging to talk about this stuff. But to me, those are the lines along which it proceeds. And it's going to go the way it's going to go. And that's just how it is.

JULIE HYMAN: I guess it's all fun and games until people start losing money. I mean, the one-- which I-- boomer-ish, I know, quibble I would have with all of that is when you're talking about objective facts that kind of bums me out, when people believe things are true that are not empirically and evidence-based truth. That-- well, I don't know. I know that's old fashioned.

MYLES UDLAND: Yeah. And I guess just a final thing on the money point, though, like, that's why AMC has all that crazy language in their filing today is because, again, they're trying to distance themselves from the things that are happening, have happened, and will happen in their shares to people's wealth. They're saying, this is not us. Don't look at us.

And again, that should be instructive of-- you know, that's kind of the only option you have here, right. You say, here's how I see it. Do whatever you want with it.

JULIE HYMAN: I'm sure that won't stop--

MYLES UDLAND: You're free to disagree. You're free to disagree with my interpretation of today's filing. That's fine. And people are going to do that. That's fine. But that is-- you know, it's me versus whoever. I mean, I'm not versus anybody. But you know what I'm saying.

BRIAN SOZZI: Blackberry shares up 27% free market. Just had to get it in.

JULIE HYMAN: Thank you, Brian.

MYLES UDLAND: It's a bid. It's a bid. Let's go.