Cinemas have borne the brunt of the various lockdowns because of the pandemic, not that you’d know it from the performance of AMC Entertainment's (NYSE:AMC) share price this year.
In the last 8 months the share price has gone from a record low of $1.91 to a record high of $72, before falling back to levels close to its previous record peaks back in 2016, when its finances were in much better shape.
AMC’s finances were in such a bad state at the end of 2020, that speculation abounded that the company was on the verge of bankruptcy.
Bankruptcy was only averted at the end of January with a $917m cash infusion, with half coming from investors who purchased shares in a stock offering held the month before.
In its last fiscal year, the company lost $4.6bn, and was burning through $125m a month to keep 438 of its US real estate open, with little or no customers and not many films to show.
Against this backdrop it's amazing the business has survived at all given the lack of revenue, but as with all things in life sometimes it pays to be lucky than good. AMC enjoyed some major good fortune in January that meant it is still around to see Q2 revenues of $444.7m and losses narrowing to $0.71c a share, or $344m.
This good fortune took the form of getting caught up in the GameStop (NYSE:GME) Reddit meme stock fallout which saw it get swept higher in a massive short squeeze, and which allowed it the opportunity to raise the additional capital it required to continue trading.
With the additional capital to buy itself time, it now has $1.8bn in cash and $2bn in liquidity, the rise in US vaccination rates has seen many more people return to the cinema, 22.1m compared to 100k a year ago. The performance in Q2 is also a marked improvement on Q1 which saw a loss of $567m on revenues of $148.3m.
It also helps that a lot of the new shareholders come from amongst the so-called Reddit traders, which means the shares seem on a much firmer base now, despite the still high levels of losses. CEO Adam Aron acknowledged this reality, but also was confident that this Hollywood story would have a happy ending.
AMC still expects to be cash flow negative for at least the next two quarters, and while management will be hoping for an improvement in the second half of the year, with the release of new titles like the new James Bond film, its biggest problem will be persuading those cinemagoers who used to like an evening out at the cinema to come back.
There’s a lot to be said for having got used to streaming on demand, as well as the luxury of the pause button on a 55-inch TV, with no one munching popcorn behind you, or eating a smelly hot dog.
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