From crypto payments, retail popcorn sales and NFTs, AMC Entertainment’s diversification push now includes acquiring a stake in a publicly traded mining company, spinning its own version of box office gold.
The nation’s largest movie chain is buying 22% of Hycroft Mining Holding Corporation, making the move alongside Eric Sprott, leading gold and silver investor. They are putting up a combined $56 million in cash, or $27.9 million each, in exchange for 23.4 million units of the company, with each unit consisting of one common share of Hycroft and one common share purchase warrant.
Aron described the 71,000-acre Hycroft Mine in Nevada as one of North America’s largest development sites with some 15 million ounces of gold resources and some 600 million ounces of silver. AMC will name a member to the board.
Said CEO Adam Aron: “To state the obvious, one would not normally think that a movie theatre company’s core competency includes gold or silver mining. In recent years, however, AMC Entertainment has had enormous success and demonstrated expertise in guiding a company with otherwise valuable assets through a time of severe liquidity challenge, the raising of capital, and strengthening of balance sheets, as well as communicating with individual retail investors. It is all that experience and skill that we bring to the table to assist the talented mining professionals at Hycroft.”
“As I have been saying repeatedly since last June, investors should think creatively and boldly about AMC‘s future, because within the company, we ourselves have been thinking creatively and boldly about our future,” he said.
“No clue,” one Wall Street analyst told Deadline this morning. “No synergistic value. Seems like a very risky investment outside of the company’s core competency. I know nothing about the mining industry so I can’t give you any thoughts about the business they are buying into.”
The investment amount relative to AMC’s cash balance is fairly minimal, noted another, whose early take on the surprise move is that it it’s using its stronger balance sheet to diversify away from theatrical. “While we remain optimistic around the rebound, recovery and growth of the theatrical industry, moves like this can provide additional growth opportunities for shareholders, while limiting the risk of having all of the company’s eggs in one basket,” he said.
Aron indicated that was the case. While “we are passionately committed to orchestrating a full recovery from COVID impacts on the cinema industry…it is not enough for us to merely bring back the AMC of old. In 2021, our retail shareholders armed us with a $1.8 billion war chest to play on offense and grow our company.”
AMC nearly went bankrupt a handful of times during the pandemic but Aron sold debt and equity to kept the company afloat, ultimately saved by an inflow of enthusiastic retail investors who began snapping up shares in early 2021. They urged each other on Reddit and across social media to buy and hold the so-called “meme stock.”
Aron said AMC can bring lessons learned navigating its own liquidity challenge to Hycroft Mining and he “believes our efforts here will be quite lucrative for AMC shareholders.”
Precious metals and commodity prices have been strong amid stock market volatility due to the Ukraine war.
It seems Aron was introduced to Hycroft by Jason Mudrick of Mudrick Capital, a former investor in AMC., that acquired the mining company in June of 2020 and listed it on the Nasdaq Capital Market (a Nasdaq tier for early-stage or companies with relatively lower market caps) under the ticker symbol HYMC.
AMC shares are trending higher in late morning, up about 2.5%. Shares of Hycroft jumped more than 30%.
Aron has been at AMC since 2016 but had a varied career before than as CEO of multiple companies including Starwood Hotels and Resort; the Philadelphia 76ers; Vail Resorts; and Norwegian Cruise Line Holdings. He was chief marketing officer of United Airlines and Hyatt Hotels & Resorts.
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