Adam Aron deserves the title Houdini. If you don't know Adam, he's the turnaround CEO who has rescued the movie theatre giant, AMC Entertainment (AMC) , from bankruptcy five times since the COVID Pandemic began.
And he's about to do it a sixth and, I believe, final time, because he's asking shareholders to approve an additional 500 million shares and judging by the relatively muted reaction to the stock when he talked about the offering today on Squawk on the Street, he can sell every share and cure his company's $5 billion in debt while growing the company, buying competitors, and become the last man standing in his field.
Adam Maximilian Aron's a genius. He's done a fantastic job for shareholders wherever he has gone, Norwegian Cruise (NCLH) , Vail Resorts (MTN) , and Starwood Hotels and Resorts. He's fearless and not afraid to break a few eggs to make some pretty tasty omelets.
So, if there's anyone who could handle the pressure of trying to save a heavily indebted movie theatre chain from going under, it was Adam, hence the name Houdini, given to him by Rich Gelfond, CEO of Imax (IMAX) , and a bit of Houdini himself.
This next stock sale is how a real pro uses the capital markets to his company's advantage. During the bad old days four months ago, when the stock traded down below two, the company was on the ropes. The short sellers were leaning all over the stock hoping to send it to near zero so no one would ever give the company money and it would go broke.
But this short pressure came right at the same time that the WallStreetBets people in Reddit, nine million strong, decided to take on short sellers and crush them. We all know that they crushed the short sellers in GameStop (GME) but they also managed to hammer them in AMC, taking the stock near the end of January from $2 to $20 in a matter of days.
The stock then retreated to $5 but it wasn't long before the buyers, again seemingly spurred by WallStreetBets, jumped to the teens and the company, which was selling shares at the market was able to get fabulous prices for a big chunk of the previous authorization.
Now, given that the buyers are still there, he's back for more money selling stock which could be immediately accretive if he could start buying some of his huge corporate debt at a substantial discount to where it should trade. He has debt trading in the thirties that's due 2024, reflecting almost certain bankruptcy but it can't happen if he sells all that stock.
I also like that if he sells all that stock he will be able to negotiate with the production companies from strength. Remember Disney+ (DIS) wants to sign up a lot of new subs. Best way may be to have its biggest movies, like Cruella and Black Widow, released as early as possible on Disney + after they open at AMC. If AMC is by far the most powerful movie theatre company because of its balance sheet and its buying of its competitors, then it can go toe to toe with the producers for a bigger window.
I know that when the stock of GameStop ran all the way up to $300 I thought management should sell stock just to pay down whatever debt it has and have a war chest so insurgent -- and now board member-- Ryan Cohen could work his magic, whatever that magic is. If you are going to reinvent the company it pays to have as much money as possible.
But, that said, GameStop has a decent balance sheet so maybe it doesn't want to take advantage of the aggressive buying by WallStreetBets. Not so Aron. He knows the capital markets are the key to staying alive and he is using them for exactly what they are worth. Oddly if the WallStreetBets people can keep the stock higher, Adam can raise even more money, buy even more debt and the stock will, indeed, be worth more. Virtuous circle? I would certainly say so. Isn't capitalism grand?