Wall Street analyst Eric Handler downgraded AMC to ‘sell’ on Monday, despite the recent rise in the cinema chain and the announcement that he will not be bankrupt soon.
Handler, of MKM Partners, said that AMC’s shares were ‘disconnected’ from the fundamentals and that they should be sold. He added that the shares could fall to $ 1 this year.
Raised by investors from Reddit’s chat group WallStreetBets, AMC shares rose more than 30 percent on Monday morning. AMC’s share stabilized at just over 6 percent in afternoon trading.
Although the stock climbed $ 4.63 or 54 percent on Friday, it has now recovered just 50 percent from the 57 percent drop it suffered last Thursday, when trading platform Robinhood continued to restrict buying in runaway shares.
Handler has lowered its bid on AMC to “sell” after being neutral since May 2020. The analyst also halved its 12-month share price target by $ 2 to $ 1, noting that while liquidity is not an issue for 2021, ‘achieving’ solvency has been a tremendous price. ”
The analyst cites the dilution of the stock following the company’s efforts to raise money by issuing new shares to retail investors, as well as the balloon debt. He also expressed concern that recent trading had “disconnected AMC’s share price and its valuation.”
The analyst acknowledged last week’s positive news that the short-term prospects of bankruptcy were avoided as the struggling movie theater chain raised $ 1.2 billion in fresh capital over the past few months.
“However, shareholders have been diluted by about 75 percent over the past few months and there is still about $ 5.7 billion in debt, a total that grows each quarter due to deferred interest payments that are charged to the principal balance,” Handler said. said. “There is also the $ 450 million deferral of deferred rent that needs to be addressed one day.”
Handler estimates that AMC currently has approximately 440 million outstanding shares, based on the company’s recent submission and market announcements [ATM] stock offers and debt exchanges. This compares with the total of 137.4 million Class A and B shares the company held at the end of October.
“It would not be surprising to see AMC exploring the possibility of another ATM offer due to the increased share price of the company,” Handler said. “Additional exchange of debt against equity is likely to be another way management will investigate.”
AMC’s share soared 506 percent this year alone, while the S&P 500 index fell 0.1 percent.