AMC, the struggling major movie chain, is raising a fresh batch of funding through Mudrick Capital. On June 1, AMC Entertainment Holdings, Inc. (NYSE:AMC) announced a deal with Mudrick Capital Management to sell 8.5 million shares of its common stock.
AMC says that it's the largest movie exhibition chain not only in the U.S. but in Europe and worldwide with 950 theatre locations. Recently, the company has struggled like many entertainment industries due to the COVID-19 pandemic. AMC grabbed headlines in January when it was part of a short squeeze that raised prices of GameStop and AMC stock.
AMC and GameStop were both considered Reddit “meme stocks” because their stock prices rallied due to social media attention rather than official company news or developments. Over the past week, AMC stock increased again to an unusual high and neared the top price it reached in January.
Mudrick Capital's agreement with AMC
As the nation seems to be coming out of the COVID-19 pandemic and restrictions are easing around the country, AMC is optimistic about the future of moviegoing. Part of AMC's movement forward is the partial sale to Mudrick Capital.
Mudrick Capital is under agreement to purchase 8.5 million shares of common stock at a price of $27.12 per share. AMC’s cash proceeds of $230.5 million will be used mainly to fund acquisitions of more theatre leases and other investments to help enhance consumer appeal of AMC theatres, according to the press release.
AMC CEO and president Adam Aron said that the transaction with Mudrick Capital would enable the company to “be aggressive in going after the most valuable theatre assets, as well as to make other strategic investments in our business and to pursue deleveraging opportunities.”
Aron also noted that the deal is a positive one for the company shareholders. He said that the 8.5 million shares being sold only represent 1.7 percent of AMC’s issued share capital and a small part of its normal daily trading volume.
“With our increased liquidity, an increasingly vaccinated population and the imminent release of blockbuster new movie titles, it is time for AMC to go on the offense again,” stated Aron.
Mudrick Capital acquisition
Jason Mudrick has founded several SPACs under his name. SPACs, or “blank-check” companies, raise capital in order to merge with another company. The first SPAC he formed, Mudrick Capital Acquisition, went public in 2018 and went on to acquire Hycroft Mining Holding.
The second SPAC headed by Mudrick, Mudrick Capital Acquisition II, filed with the SEC in October 2020 to raise up to $300 million in an IPO.
Jason Mudrick's success
Mudrick is the founder and chief investment officer of Mudrick Capital Management, L.P. Mudrick started the investment firm, which specializes in distressed credit investments, in 2009.
Mudrick Capital Management started with just $5 million in assets under management. As of May 2021, that total had grown to about $3.8 billion for primarily institutional clients.