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AMC Theatres might face bankruptcy due to the coronavirus pandemic and the complete shutdown of its business, an analyst told The Hollywood Reporter.
What’s going on:
- MKM Partners analyst Eric Handler changed his rating for AMC Theatres’ stock to “sell,” which is a drop down from “neutral.” The move suggests people should sell their stock in the company because “bankruptcy appears likely.”
- Handller said: “Based on our view that theaters will be closed until at least August and our belief that AMC lacks the liquidity to stay afloat until that time, we expect the company will soon be faced with filing for bankruptcy. Further fueling our liquidity concerns is AMC’s decision to stop paying rents to landlords effective April.”
- On Wednesday, Loop Capital analyst Alan Gould pulled a similar move, changing the rating to “sell” over fears that the company will have to file for chapter 11, according to The Hollywood Reporter.
- Gould said: “We think bankruptcy is a distinct possibility, and at a minimum, the company will require a highly-dilutive financing.”
How it happened
- AMC Theatres announced in March that it would close its theaters for time being as the coronavirus pandemic has increased social distancing. AMC originally announced a theater size reduction before shutting down completely.
- But movie theaters expect to be ready for when moviegoers decide to come back. AMC Entertainment CEO Adam Aron predicted theaters would open again in June, though, according to The Hollywood Reporter.
- Aron said: “We said we expected to be shut for six to 12 weeks. That would be May 1 to mid-June. That might be more the right timing.”
- Jeff Whipple, a spokesman for the Megaplex Theatres here in Utah, told the Deseret News that the theater chain will be prepared for the return of its guests.
- “There is something wonderful when we get together to share these kinds of experiences, what that looks like going forward, and how guests interact is always changing,” Whipple said.