AMC Theatres (NYSE: AMC) stocks rallied on a rumor that Amazon (NASDAQ: AMZN) was looking into potentially purchasing the theater chain, which has been struggling financially amid the coronavirus pandemic.
Rumors of a potential Amazon buyout of the struggling theater chain were triggered by an article by the Daily Mail published over the weekend. According to "sources" that went unidentified in the article, Amazon was in talks with AMC over a potential buyout. The timing of the negotiations and whether or not they were affected by the pandemic, or if they are still ongoing and the deal even on the table, are all currently unknown.
Despite the lack of hard details, news of a potential buyout of the struggling chain by a hugely successful industry giant was enough to give AMC a much-needed rally. AMC shares were up 42.27% Monday morning, reaching $5.86 per share. The rally breathed life into a company that has been in dire straits after months of pandemic related financial turmoil.
AMC made headlines recently when it had a heated falling out with Universal (NASDAQ: CMCSA) after the studio announced that it would no longer be exclusively distributing new releases to theaters, and would be simultaneously making new releases available on digital outlets even after the coronavirus pandemic subsides. AMC did not mince words in its rebuke of Universal, with its CEO voicing vehement disapproval of the studio's departure from traditional distribution. AMC faced other studios potentially making the same decision after Warner Media (Parent company Charter Communications, (NASDAQ: CHTR), and Disney (NYSE: DIS) made comments about exploring parallel releases.
The lack of details regarding the potential sale, and the lack of response from both Amazon and AMC regarding the deal, casts some doubt over the veracity of the rumors. It is entirely possible that Amazon may be seeking to diversify its shares in the global marketplace, as it has in the past, such as its purchase of Whole Foods. Even if the rumors should turn out to be accurate, it is unknown if such a buyout would happen given the tumultuous state of AMC's holdings amid global shelter-in-place orders and the general fear of exposure to the coronavirus. It is possible that if the talks had been taking place before the pandemic, that AMC's shaken state may have derailed any such deal. It is also possible that Amazon may seek to capitalize on this shaken state by seizing the theater chain, which, despite its financial woes, still possesses a considerable market share.