Movie theater chain’s market cap was down to just over $200 million last month before bouncing as COVID-19 resulted in theater shutdowns
Shares of AMC Entertainment Holdings rocketed on heavy volume Monday, after a media report that the struggling movie theater chain had held buyout talks with Amazon, as AMC’s value has shrunk since the COVID-19 pandemic led to theater shutdowns world-wide.
AMC did respond to a request for comment.
The stock AMC, +29.75% shot up 30.0% to $5.32, the highest close since March 4. Trading volume spiked to 105.2 million shares, compared with the full-day average of about 9.1 million shares. Amazon shares AMZN, +1.23% rose 1.2%.
The U.K.’s Daily Mail reported over the weekend, citing sources, that AMC Entertainment Holdings Inc., and e-commerce and cloud giant Amazon.com Inc., which also is the parent of Amazon Studios, have previously held talks. The report said it wasn’t clear if merger talks were still active, or will lead to a deal.
AMC, which is the parent of the AMC and Carmike theater chains in the U.S. and the Odeon Cinemas chain in the U.K., has been struggling since the COVID-19 pandemic has led to shutdowns of movie theaters across the globe. Meanwhile, Amazon Prime Video was recently ranked second, behind Netflix Inc. NFLX, +1.14% among U.S. streaming consumers.
Analyst Eric Wold at B. Riley FBR said what may also be piquing Amazon’s interest in AMC beside just a cheaper price is the November 2019 announcement by the Justice Department’s antitrust division that it would open a review of the Paramount Consent Decrees in place since 1948 regarding a studio’s ownership of a theater chain.
“With Amazon not dependent on any other release windows beyond its own subscription service (other than to qualify for industry awards), we would view increased control over the theatrical window through the acquisition of a large exhibitor as providing Amazon both an incremental earnings stream from its own films and an attractive marketing vehicle to drive additional subscribers being exposed to the studio’s films—something that, we believe, other studios would be comfortable with them doing,” Wold wrote in a note to clients.
AMC’s market capitalization fell to a low of about $216 million last month before bouncing to $554.6 million as of Monday’s close. The market value was down from $751.9 million at the end of 2019, and from $1.44 billion a year ago.
Wold said he would be “surprised” if AMC shareholders would back an acquisition, which would likely be all cash, with the stock down near all-time lows.
The stock has more than doubled from the record closing low of $2.08 on April 13, but was still down 26.5% year to date and 61.5% over the past 12 months. Meanwhile, Amazon’s stock has rallied 27.5% over the past year and the S&P 500 SPX, +0.01%, by comparison, has gained 1.7%.
The rally off last April’s low got a boost after the company said it had enough liquidity to withstand a suspension of operations into November. Also providing a bump, some states have allowed movies theaters to reopen this month, with social distancing.