[fairity]

> It's not an unrealistic valuation. It wasn't completely insane like GME. AMC only went up to $20 for one day (near its Oct 2018 price) and is now at $8.28 (roughly where it was at pre-pandemic).

I beg to differ. AMC has nearly tripled their share count during the pandemic via ATM offerings. So, an $8 share price now is not the same as it was pre-pandemic. AMC's valuation now is 3x higher than pre-pandemic, which is indeed, insane, considering the state of their business.

Source: https://ycharts.com/companies/AMC/shares_outstanding

[jzer0cool]

How does something like this work if someone were holding shares before? Would they expect to see a 3x on the price?

[fairity]

How share price reacts depends on a few factors: the price of the ATM offering, whether the offering is viewed as a sign of distress, and how the cash is used (or not used).

If the ATM offering is priced at the current share price, and the company plans to just sit on the cash that it raises, the share price won't move much. Reason being: even though your shares are diluted, the company's total valuation increases (bc of the extra cash it just raised). Smaller piece of a larger pie == same value.

However, AMC's offering was far from this ideal scenario. Instead of sitting on the cash raised, they're burning through all the cash they're raising just to keep the lights on. So, shareholders experienced dilution without any increase in company value. In a sane market, you'd expect share price to decrease by the dilution percentage. The fact that this hasn't happened (combined with the fact Cinemark's share price is still half of its pre-pandemic levels) should worry anyone with a long position.

[runawaybottle]

What’s worse for prices in this market is the appearance that your business can’t grow. Based on AMC’s situation (which is zero as far as I’m concerned), all it can do is grow. Sounds ridiculous, but it’s a growth stock.

It’s in the same class as any tech ipo imho.

This gives some insight on where the company was at pre-pandemic:

https://www.hollywoodreporter.com/news/amc-theatres-quarterl...

But in general, I think there’s good evidence that non-box office releases depress overall revenue (Mulan). Big studios want to be in theaters.

It’s not in the movie industry’s interest to let AMC fall, and AMC and all the pandemic hit industries are going to have to run a lean business to overcome the debt. In the above article AMC said they didn’t want to run ads (non-trailer) before the movie - well, now they will have to. There’s a lot they can do.

They seem like obvious plays to me.

[fairity]

> But in general, I think there’s good evidence that non-box office releases depress overall revenue (Mulan). Big studios want to be in theaters.

I do buy this.

> It’s not in the movie industry’s interest to let AMC fall.

But, I don't buy this. AMC going bankrupt doesn't mean theaters go away. In all likelihood, AMC would live on as a new corporation after paying out creditors in the bankruptcy process.

An AMC bankruptcy actually seems like a best case scenario for the movie industry. After relieving itself of debt, AMC can afford to lower prices (due to a lower cost structure). And, lower prices means more ticket sales and more studio revenue.

> In the above article AMC said they didn’t want to run ads (non-trailer) before the movie. There’s a lot they can do.

Definitely agree here, but all these opportunities existed prior to the pandemic. So, I'm wondering how you can justify the appreciation in valuation over this period. Was AMC just severely underpriced prior to COVID?

[runawaybottle]

This is the part where I’m going to bust out some stock astrology. We need to trade AMC on sentiment outlook (and by sentiment, I mean literal feelings), not fundamentals.

Pre-pandemic there was little reason to put AMC in the same field of view as other growth stocks. It was visible along a completely different angle, that of a ‘declining industry, streaming will eat it’s lunch’. That’s where people crunched the numbers.

It’s been realigned with beaten up stocks now, and positioned in the same field of view of ‘recovery’. In fact, I’d also say it’s positioned now to answer the question of ‘Will steaming kill the movie theater?’. If they can survive a pandemic and regain attendance, then we get some serious answers about this business versus the one dimensional view of Netflix/Amazon just eradicating them pre-Covid.

In short, fundamentals don’t mean much for this stock right now. It’s set up to answer bigger questions. Will people go back to movies? Will people travel? Is remote working here to stay? We can’t crunch numbers for questions like this yet.

So I think it’s good to trade on sentiment right now and once we have answers about where things stand after the shuffle, we can go ahead and evaluate it’s exact price.

BUT, all bets must go in now. The sentiment will be priced in well before we ever get to their first real earnings report in the post pandemic world.