Shares of AMC Entertainment Holdings Inc. plunged Monday, after the struggling movie theater operator disclosed a plan to sell a relatively massive amount of shares, which could more than triple the number of Class A shares currently outstanding.
The company
AMC,
said in an 8-K filing with the Securities and Exchange Commission late Friday that it entered into an “equity distribution agreement” with sales agents Goldman Sachs & Co. LLC and B. Riley Securities Inc., in which up to 178,021,978 Class A shares may be sold from time to time through an “at-the-market” offering program.
As of Oct. 30, AMC had 86,624,174 Class A shares outstanding. There were also 51,769,784 Class B shares outstanding.
The stock tumbled 16.3% in very active afternoon trading, paring earlier losses of as much as 23.5%. Trading volume swelled to 56.5 million shares, already more than double the full-day average of about 26.7 million shares.
Based on current share prices, the equity distribution agreement could bring in up to roughly $583.9 million.
The share-sale plan comes after the company said before Friday’s open that it had secured a commitment for $100 million of new high-yield first lien debt financing, and agreed to convert $100 million of existing debt into common shares, in an effort to bolster liquidity.
The first lien notes, due 2026, will beat interest of 15% per year. In comparison, the yield on 5-year Treasury notes closed Friday at 0.37%.
Also read: Why cinema will survive the coronavirus pandemic.
The company has repeatedly tapped the capital markets this year to raise cash, as many of its movie theaters have been closed or have been operating at limited capacity during the COVID-19 pandemic.
See related: Warner Bros. streaming shake-up praised by some analysts, while others say it won’t work.
In AMC’s last three quarterly 10-Q filings with the SEC, the company warned that it had “substantial doubt” about the ability to continue as a “going concern.”
The stock has plummeted 54.7% year to date, while the S&P 500 index
SPX,
has gained 13.6%.