AMC CEO says more meme-stock powered deals are coming

Hycroft Mining Holding

28/03/2022 10:00

By Mike Spector
    March 28 (Reuters) - AMC Entertainment Holdings Inc  AMC.N 
Chief Executive Adam Aron said the movie-theater chain would
embark on more "transformational" deals to capitalize on the
interest of retail investors following its bet on a troubled
gold and silver mine operator. 
    AMC unveiled a $27.9 million investment for a 22% stake in
Hycroft Mining Holding Corp  HYMC.O  about two weeks ago, an
unusual deal for a company operating more than 900 theaters
worldwide that raised eyebrows among market observers. 
    AMC's investment called upon a $1.8 billion "war chest" it
raised in 2021 by selling its shares in the open market, in part
on the back of retail investors who turned it into a popular
'meme' stock. 
    Aron said in a phone interview from a limousine in Los
Angeles en route to the Academy Awards on Sunday that AMC's
investment in Hycroft had done well from the start. AMC bought
Hycroft shares at $1.07, and they were trading at $1.32 last
week.
    "I'd like to think there will be more third-party external
M&A announcements going forward where AMC can reach for the
stars and intriguing investments that have potentially
attractive returns," Aron told Reuters. 
    AMC's stock in mid-March had fallen to around $14 but
rebounded to more than $20 following the Hycroft investment.
    Hycroft, which was on the verge of bankruptcy prior to a 
cash infusion from AMC and longtime precious-metals investor
Eric Sprott, said on Friday it had subsequently raised nearly
$195 million through open-market stock sales as other investors
followed Aron's lead.
    Aron said he expects AMC's investment, which includes shares
and warrants, to be "lucrative." The deal was disclosed March
15, the day after Aron's tour of the company's mining operations
in Northern Nevada outside Winnemucca, not far from the site of
the annual Burning Man arts and music festival. 
    Some analysts questioned AMC's investment, expressing
concern that the bet is far afield from the company's core
competency and wondering whether the money could be better spent
repaying the chain's debt, which exceeded $5 billion at the end
of 2021.
    
    "TRANSFORMATIONAL M&A"
    Aron defended the bet on Hycroft in the Reuters interview,
arguing that it drew on AMC's own experience skirting bankruptcy
less than two years ago, and pointing out that it had the
support of retail investors. 
    "Transformational M&A is mandatory. Our shareholder base has
given us capital to deploy with the clear expectation that we
are ... going to do exciting things with the money they
entrusted to us," Aron said.
    He added that the nearly $28 million investment was small
relative to AMC's total cash, and that the company would still
strengthen and expand its core business. He cited AMC's recent
acquisition of former Arclight and Pacific cinema locations, and
said the company had plans to add more premium screens at
existing theaters and retire some of its debt. 
    Aron said Hycroft is a company with solid assets that faced
a liquidity crisis that reminded him of AMC's dire straits not
long ago. Sprott's involvement buoyed Aron's confidence, he
said.
    "While the Hycroft investment is pretty far from home, it
does rely on a core competency of our company to understand
balance sheets, and raising cash, and solving liquidity
problems," Aron said. 
    
    SHAREHOLDER FEEDBACK
    New deals will not necessarily be so out of the mainstream
for AMC, Aron said, pointing to the company's recent decision to
launch a co-branded credit card and its move to sell branded
popcorn at retail establishments. 
    The common denominator, he said, will be feedback from
shareholders. He now tweets nearly once a day and follows about
2,500 AMC retail investors on the social-media website. 
    Aron's tweets have been read more than 200 million times
since April, he said. He added he has also hosted sneak previews
of films for some of these investors, and expects to do perhaps
a dozen more of them this year. On earnings calls, AMC now takes
questions from retail investors in addition to securities
analysts. 
    That's a shift from the traditional conference calls and
road shows that companies have relied upon for communicating
with institutional shareholders. 
    "What's different is not the need to communicate with
shareholders. What's different is who the shareholders are,"
Aron said.

 (Reporting by Mike Spector in New York; editing by Jane
Wardell)
 ((mike.spector@thomsonreuters.com;))