Friday, May 27 2022

March 28 (Reuters) – AMC Entertainment Holdings Inc (AMC.N) chief executive Adam Aron said the cinema chain would embark on more “transformative” deals to capitalize on interest from retail investors following his bet on a troubled gold and silver market. mining operator.

AMC unveiled about two weeks ago a $27.9 million investment for a 22% stake in Hycroft Mining Holding Corp (HYMC.O), an unusual deal for a company operating more than 900 theaters worldwide that raised eyebrows among market watchers.

AMC’s investment tapped into a $1.8 billion “war chest” it raised in 2021 by selling its shares on the open market, partly on the back of retail investors who did a popular “meme” action.

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Aron said in a phone interview from a limo in Los Angeles en route to the Oscars on Sunday that AMC’s investment in Hycroft had worked 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 external third-party M&A announcements in the future where AMC can hit the stars and intriguing investments that have potentially attractive returns,” Aron told Reuters.

AMC shares in mid-March had fallen to around $14, but rebounded to over $20 following the investment in Hycroft.

Hycroft, which was on the verge of bankruptcy before a cash injection from AMC and longtime precious metals investor Eric Sprott, said on Friday it 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 stocks and warrants, to be “lucrative.” The deal was disclosed on March 15, the day after Aron visited the company’s mining operations in northern Nevada, outside Winnemucca, not far from the site of the annual arts and music festival. Burning Man.

Some analysts questioned AMC’s investment, fearing the bet was far from the company’s core competency and wondering if the money couldn’t be better spent paying off the chain’s debt, which exceeded 5 billion dollars at the end of 2021.

“TRANSFORMATIONAL M&A”

Aron defended the bet on Hycroft in the Reuters interview, saying he was drawing on AMC’s own experience skirting bankruptcy less than two years ago, and stressing he had the backing of retail investors.

“Transformational mergers and acquisitions are mandatory. Our shareholder base has given us capital to deploy with the clear expectation that we will … do exciting things with the money they have entrusted to us,” Aron said.

He added that the nearly $28 million investment was small compared to AMC’s total cash flow and that the company would continue to strengthen and grow its core business. He cited AMC’s recent acquisition of former Arclight and Pacific theaters, and said the company plans to add more premium screens to existing theaters and pay down some of its debt.

Aron said Hycroft is a company with strong assets that faced a liquidity crunch that reminded him of AMC’s dire straits not too long ago. Sprott’s involvement boosted Aron’s confidence, he said.

“While the investment in Hycroft is quite far from home, it builds on a core competency of our company to understand balance sheets, raise funds and address liquidity issues,” Aron said.

SHAREHOLDER FEEDBACK

The new offerings won’t necessarily be so out of the ordinary 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 locations. by retail.

The common denominator, he said, will be shareholder feedback. He now tweets almost 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 that he has also held film previews for some of those investors and expects to do maybe a dozen more this year. On earnings calls, AMC now answers questions from retail investors in addition to securities analysts.

It’s a change from the traditional conference calls and roadshows that companies have relied on to communicate with institutional shareholders.

“What’s different is not the need to communicate with shareholders. What’s different is who the shareholders are,” Aron said.

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Reporting by Mike Spector in New York; edited by Jane Wardell

Our standards: The Thomson Reuters Trust Principles.

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