AMC warned investors on Tuesday that as its cash reserves continue to dwindle, the company is potentially heading towards Chapter 11 bankruptcy, especially if it is unable to secure additional sources of liquidity.
As a result of the increasingly dire situation, AMC has agreed to sell as many as 15 million shares of its stock–stock that may not be worth the paper it is written on should the company ultimately go under.
On Monday, AMC stock jumped more than 22% after New York Gov. Andrew Cuomo announced that theaters throughout the state–excluding New York City and other select counties–could resume operations under strict protocols. AMC CEO Adam Aron told CNBC that the move was “a monumental step forward” for the industry.
However, by midday Tuesday, the stock price had already given back more than half its gains, sliding 12%. Its current price of $3.10 is down some 56% for the year.
“We will require significant amounts of additional liquidity and there is substantial doubt about our ability to continue as a going concern for a reasonable period of time; holders of our Class A common stock could suffer a total loss of their investment,” the company wrote in the SEC filing.
If AMC were to file for Chapter 11 bankruptcy, it wouldn’t mean the immediate shuttering of its locations, of course. The filing would likely allow the chain to stay in business while it reworks its debt and sorts out new lines of liquidity.
Over the course of the first nine months of 2020, AMC took in revenue of $1.08 billion. That figure represents just a fraction of the $4.02 billion it took in during the same period last year.