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The divergent paths of Cineworld and AMC amid box office slowdown

Aug 23, 2022
Illustration of a movie theater marquee with question marks on it

Illustration: Annelise Capossela/Axios

For good and ill, AMC and Cineworld's futures are inextricably linked as the theatrical industry struggles to recover from the pandemic.

Why it matters: Cineworld's financial troubles could lead to more consolidation in a market that's been shrinking since the pandemic.

Driving the news: Cineworld's bankruptcy filing has cast a pall over AMC's debut of its new class of shares.

  • AMC's primary stock plummeted 41% to close at $10.46 yesterday, which CEO Adam Aron said was expected since the new APE (AMC Preferred Equity) securities were granted to each of AMC's stakeholders.
  • Aron said investors should think of their AMC stock's value as a combination of the two securities, since these new APE shares carry the same economic value and voting power. APE shares closed at $6, making up for most of that drop.

Meanwhile: AMC is also trying to move into other businesses. It bought a mining company in March and plans to eventually sell its movie theater popcorn in stores.

The other side: For Cineworld, the situation could not be more different.

  • The U.K.-based theater giant that owns Regal Cinemas in the U.S. has about $9 billion in debt, largely thanks to its $3.6 billion purchase of Regal in 2018. The company also owes Cineplex a $1 billion payout after backing out of a deal to acquire the Canada-based chain.
  • After the Wall Street Journal first reported Cineworld was considering bankruptcy last Friday, its stock in London crashed by as much as 80%. It fell another 20% Monday.

The intrigue: If Cineworld were to divest some of its assets during the bankruptcy process, AMC could be a willing buyer.

  • "Given that AMC already operates theaters within Europe, we believe AMC could become an interested buyer. As for Regal assets in the U.S., we could see AMC maneuver around market share restrictions with lease takeovers," said Eric Wold of B. Riley Securities in a note on Monday, according to Deadline.
  • AMC has been an active buyer of theaters, having acquired one-third of the former Arclight-Pacific Theater group and five-eighths of Bow Tie Cinemas locations in the Northeast in recent months, Aron said.

The bottom line: No matter what kind of deal could happen between AMC and Cineworld, the reality is that the bad news surrounding the latter will keep dark clouds above the former until the financial storm passes.

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