AMC Theatres (NYSE: AMC) is considering a range of options to relieve itself of its mounting debt as the coronavirus pandemic rages on, keeping consumers at home. The company is reportedly considering measures up to and including Chapter 11 bankruptcy.
Uncertainty over the theater chain's future has been a strain on AMC's investors since the pandemic shut down the United States economy for several weeks. The sobering reality that AMC may be on the path to running entirely out of money, possibly even before the end of the year, was revealed by a Tuesday filing with the U.S. Securities and Exchange Commission, which caused shares to plummet as investors balked at the prospect of AMC running dry.
The report's filing coincided with a concerning story run by Bloomberg, where anonymous sources reported that the company was considering bankruptcy as an option. According to the sources, AMC's lenders are discussing the possibility of providing the beleaguered company with financing if it decides to pursue Chapter 11 filings. Likely in response to the rumors, AMC CEO Adam Aron spoke to Bloomberg on Wednesday, stating that the company was focusing on fundraising at the moment, and that "any reports to the contrary are wholly inaccurate." Aron's words appear to have done little to assure investors, as the company's stock remained below $3 as of market close on Wednesday.
AMC faces a desperate situation with few options other than trying to buy extra time to wait out the pandemic. Even if the company can outlast the pandemic, studios have already begun entertaining the prospect of revisiting their distribution models. Earlier in the year, AMC experienced a bitter falling out with Universal Studios (parent company Comcast, (NASDAQ: CMCSA) over the latter's decision to stray away from the traditional theater release model. Universal is far from the only company considering a departure, however, with Warner Media (parent company Charter Communications, (NASDAQ: CHTR) and Disney (NYSE: DIS) both considering similar models.
Given that any recovery for the ailing theater chain appears to be non-existent, perhaps at least for now, it's no surprise that AMC's stock lost 27.5% of its value in two days. Shares of AMC were down 9% by the end of trading on Tuesday, dropping from $3.90 to $3.55. The situation significantly worsened overnight, with shares suffering a 13% drop to $3.09 by the time markets opened. AMC's share price fluctuated throughout the day but ultimately ended trading on Wednesday below $3.