Why AMC Entertainment Holdings (AMC) Stock Is Surging Today

By Amit Chowdhry ● May 11, 2020
  • At the opening of the market today, the stock price of AMC Entertainment Holdings Inc (NYSE: AMC) jumped above 40% due to speculation that it is in talks to be acquired by Amazon.com

At the opening of the market today, the stock price of AMC Entertainment Holdings Inc (NYSE: AMC) jumped above 40% due to speculation that it is in talks to be acquired by Amazon.com, Inc. (NASDAQ: AMZN), according to a report published by British news company The Daily Mail. However, Deadline’s sources that Amazon and AMC were not actually in talks.

AMC is reportedly on the verge of financial ruin, largely due to the stay-at-home orders associated with the COVID-19 pandemic. This would give Amazon an advantage in the negotiations if the rumors are true.

Why would Amazon buy AMC? It would potentially enable Amazon to control the screening of films, including its own original programming. A couple of years ago, Amazon and Netflix both reportedly looked into buying out Landmark Theaters, but it lost to a bid from Cohen Media Group. The advantage that AMC has is that it runs around 10,000 screens across the world compared to Landmark’s 250.

AMC was acquired by Chinese company Dalian Wanda for $2.6 billion in 2012, but it bought back $600 million worth of shares in 2018. 

While under the ownership of Dalian Wanda, AMC aggressively expanded by buying Odeon in the UK for £920million and Carmike Cinemas for $1.1 billion.

The aggressive expansion plan led to AMC stuck with debt of $5 billion. AMC raised $500 million from bond investors last month.

Last year, AMC saw a loss of $149 million on revenues of $5.5 billion. And the company’s net debt was at $4.7 billion.

Disclosure: I own a small number of Amazon shares. I wrote this article myself and I do not have any business relationship with any company whose stock I write about. I am not a financial advisor and all articles are my opinion. You should do your own due diligence and consider talking to a financial professional before investing.