Except for their cash burn over the duration of the pandemic weakening their position, as they likely had to take on debt to survive. Can they service the debt and be profitable?
You’d have to look at their filings to find out, but I remember it looking very grim for AMC.
About 6x more as % of the population died - and it didn’t discriminate between healthy/sick, young/old. It’s hard to imagine how covid should somehow be worse on the economy.
Its not pretty. Their assets are about $13B and debt is like $6B. What really bugs me is it seems like their assets are approximately 2/3 real estate, which I assume is all the theaters, and 1/3 goodwill. So all they really have going for them is their brand, which seems to be valued at $4B!
And you have to wonder what the real estate is really worth. Like, it might be worth a lot to them specifically, or even another movie theater company, but it’s probably not worth much to anyone else and/or would require massive investment to repurpose. Plus they’re generally attached to or within dying retail centers.
Are we looking at the same AMC? Most recent 10-Q has them at $10.9 billion of assets and $13.2 billion of debt. About $4.5 billion of operating leases cancel out (both asset and liability), so what’s left is roughly $6.4 billion of assets and $8.3 billion of liabilities. Of the $6.4 billion in assets, $2.9 billion is goodwill and $2.3 billion is property.
But I would guess that the property/real estate is worthless, as they own less than 10% of their theaters - virtually all of that Balance Sheet amount is a combination of leasehold improvements and furniture/fixtures/equipment.
Yes, that’s what I’m getting at exactly. The real estate they own is correlated in value to their positive cash flow. Pretty classic risk mismanagement.
I just Googled them and looked at what popped up, may have been a balance sheet from last year end. Thanks for the clarification.
FYP
They have some huge theaters in New York in prime tourist locations that would be worth a lot based on redevelopment potential if they own them. At least assuming that NYC real estate doesn’t go to the toilet.
Right and no competitor wants that real estate right now. Amazon might swoop in and buy it if they hit bankruptcy, but only at a heavy discount. Basically none of these theatres got out in front of, or caught up to, the impact of screening and technology. So back to normal just means continuing that slow plodding walk to their demise.
But STONKS, so suzzer is probably going to make money here.
Well, their precarious financial situation is not necessarily a sign that its a bad investment. The question is - is the equity cheap enough at the current price? Their situation doesn’t seem hopeless, if they can hold on.
This is probably a hot take but we aren’t ever going back to pre-covid normal. For that to happen you need behavior to go back to where we were a year ago. I don’t really see that happening for a few reasons:
1)I think Covid is likely to be here for good in one shape or another. It will likely never be this bad again but some segment of the population will just never go back to pre-covid behavior. I think that is a small but significant portion of consumers. Worldwide eradication seems impossible.
2)A lot of consumers will have 1-2 years of seeking out alternative behavior by the time we all have access to the vaccine and some will actually find out they prefer the alternative vs. their normal pattern of behavior pre-covid. How many of us were just mindlessly eating mediocre meals out 3-6 times a month, going to the new movie out of habit or similar? I don’t find I miss those things much. I miss human interaction and unique experiences like adventurous travel. Eating at some soulless chain or paying $30 to watch a movie crammed in with a bunch of others, not so much. New habits and addictions have been created and those will be hard to just instantly disappear.
3)I have seen some people say they have an almost PTSD like response to seeing large crowds. I also do not think as fondly of going to packed sporting events, concerts, movies,cruises, etc. anymore. The absurdness of being literally touching other random humans because we are so packed in at a concert or sporting event is going to seem less appealing.
In short I would be surprised if things are ever the same as they were in 2019 or before.
Man, I’ve never looked closely at AMC, but this is some nightmare fuel:
In the absence of additional liquidity, the Company anticipates that existing cash resources will be depleted during January 2021. To remain viable through 2021, the Company currently estimates that it will require at least approximately $750 million of additional liquidity to fund its cash requirements, although this estimate is subject to a number of assumptions and may vary materially. Given the uncertainty regarding our ability to raise material amounts of additional liquidity and the uncertainty as to the time at which attendance levels might normalize, substantial doubt exists about the Company’s ability to continue as a going concern for a reasonable period of time.
Commencing in 2021, our cash expenditures for rent are scheduled to increase significantly as a result of rent obligations that have been deferred to 2021 and future years that are in excess of $400 million as of November 30, 2020. In light of our liquidity challenges, and in order to avoid bankruptcy, we believe the Company must reach accommodations with its landlords to abate or defer a substantial portion of the Company’s rent obligations
As disclosed above, on December 10, 2020, we entered into the Commitment Letter with Mudrick, pursuant to which Mudrick committed, subject to the satisfaction of certain conditions precedent, including the payment of the Commitment Shares and consummation of the Second Lien Exchange (as defined below), to purchase $100 million in aggregate principal amount of new 15%/17% Cash/PIK Toggle First Lien Secured Notes due 2026 to be issued by the Company.
Definitely a good sign when you’ve got to borrow money at 15%. Oh, and
As consideration for its commitment, Mudrick will receive a commitment fee equal to 8,241,758 shares of the Company’s Class A common stock.
So they’re paying like $24 million in stock for the privilege of borrowing $100 million at 15%. Good times.
I think there’s definitely something to this. I expect something divergent - half the people will migrate to a new set of consumer behaviors and half will double down on old behaviors.
One thing I left out that is only partially related is wrt oil prices/oil stocks. We now have an almost unlimited supply of untapped resources. The only thing that has stabilized prices between 40-45 this year is massive production cuts especially in the US. If that price starts to creep up into the 50s we will see production ramp up which puts a ceiling on the price of oil as we go forward. In the medium and long term oil demand will also suffer as many countries push towards renewables.
It’s basically PEAK OIL in reverse.
Lol who was that PEEK EARL guy on 2+2? Jiggs or something?
I was hoping someone else would remember that. That guy did hundreds of PEAK OIL posts and I bet they are hilarious now. I don’t remember the SN though.
Jiggs Casey. Was he also a 9/11 truther? or maybe I’m confusing him with somebody else.
That’s it, JiggsCasey no space. Googling “Jiggs Peak Oil” gets a quadraziillion hits.
Another thing I have thought of is of course there will be an explosion of travel once Covid is mostly over. But how much of that will be from airline/hotel credit we have sitting around in virtual bucks the businesses have already spent the real money they received to stay afloat. I have so much travel credit I can’t even keep track of it all.
These companies have been surviving by selling tickets they know they will refund in many cases. They will be receiving $0 for many many flights in 2021 and 2022.
Lastly this isn’t really investing advice. STONKS gonna STONK and suzzer may nail these trades. Just some things I have thought about wrt to where the economy goes in the future.