Dalian Wanda, which acquired AMC Entertainment in 2012, surrendered control of the struggling exhibitor as it issued and sold tranches of new stock to raise cash — diluting the stake of the Chinese conglomerate.
CEO Adam Aron confirmed the Wanda era was over although the company continues to be AMC largest single largest shareholder. Wanda holds less than 10% of the world’s biggest cinema chain. “They have been absolutely delightful,” he said on a post-earnings conference call Wednesday. “Now AMC will be governed like most other publicly traded companies with a wide array of shareholders.”
Aron touched on the stock’s Reddit rally, Silver Lake’s exit, negotiations underway with landlords and AMC’s cash position.
Most of AMC’s revenue disappeared last year and it lost almost a billion dollars in the fourth quarter and $4.6 billion for all of 2019.
Wanda had acquired AMC’s super-voting Class B stock that has three votes a share, making it the controlling stakeholder as long as its economic interest stayed above 30%. But Wanda converted the B shares to regular Class A, with one vote each. New shares AMC issued to raise funds during the pandemic diluted Wanda’s stake to well below that 30% threshold.
Wanda has two directors on AMC’s board, Lin Zhang and Zeng Maojun.
Big investment firm Silver Lake Partners, which provided AMC with a cash injection in 2018 by acquiring $600 million of AMC convertible bonds, has cashed out. Taking advantage of a Reddit-fueled AMC stock rally in January, Silver Lake converted its debt to equity, getting 44 million shares at $14 each then selling them for $713 million.
That removed $600 million of interest-bearing debt from AMC’s books. Aron said the “relationship has been highly important to us” and he hopes Silver Lake’s rep on the AMC board, managing director Lee Wittlinger, “will continue to serve for a long time to come.”
On Reddit, Aron said only, “I really have taken to heart one thing. How 101 year-old AMC is a crucial part of the American zeitgeist.”
Retail traders on Reddit chatroom Wall Street Bets convulsed financial markets starting late last year by pouring suddenly into a handful of down-and-out stock led by GameStop and AMC. Shares of the exhib, which had been under two bucks at one point last year, shot up to over $20. The impact lingered. The stock closed Thursday at around $10.
Aron noted that 99% of the cash AMC raised came in “before Reddit.”
The company has $1 billion of cash on its books – enough to see it through 2021 if there’s even a semblance of recovery. It’s taken a breather since January from raising capital but remains focused on strengthening its liquidity position and paying down debt, he said.
He thanked landlords for deferring rent last year. CFO Sean Sullivan said a chunk of deferred rent comes due in the first quarter but talks are ongoing for additional concessions. He said AMC closed 60 theaters last year — 48 in the U.S. and 12 abroad.
Aron said landlords want to stay in business with AMC. The chain will keep building and leasing theaters but in new deals landlords will shoulder more risk than in the past.