AMC Entertainment’s Cryptocurrency plans may not be useless after all. here why

The struggling theater and film company – and Meem’s premium stock – AMC Entertainment (NYSE: AMC) It was announced on November 12 that it is now accepting multiple types of cryptocurrency as payment. On the surface, this move may appear moot in terms of its attempt to recover from its long decline. But there’s more to this idea than meets the eye, which could actually help AMC rebound if moviegoers respond positively. This is why accepting these payment methods can be an additional piece in the puzzle of getting the company back on the right track to make a profit.

AMC debts and the “army of monkeys”

One of the biggest challenges for AMC Entertainment is the massive debt burden on its balance sheet. For $1.6 billion in cash for the company at the end of the third quarter, AMC reported on November 8 that it had $5.4 billion of outstanding debt, along with about $200 million in other liabilities, including leases. Reducing that debt is clearly a priority in any attempt by AMC to get back on its feet, but at least one hurdle stands in its way.

Image source: Getty Images.

A strong potential enabler and a serious obstacle to AMC’s recovery is the mass of retail investors who currently own most of its outstanding shares. By rushing into the company earlier this year, intent on “rescuing” it from short sellers and hedge funds (suggesting that this group of investors may not have a clear understanding of how short selling works), this fictional swarm of small investors orchestrated Their first work is a short press on the WallStreetBets Reddit sub-forum. There, they called themselves “Monkeys” or “Monkey Army”, after the fictional Monkey Army in planet of the apes Film series said to be “stronger together”.

Redditors quickly pushed AMC’s stock price to incredible levels in early June, well above what the company’s business performance would normally deserve. With the goal of making a personal profit while pursuing a mysterious but honest crusade to rescue AMC from the clutches of what they thought were short sellers and nefarious “hedges”, they successfully implemented a short squeeze, as they recently did with Jim Stop. Over the next five months, they mostly managed to keep the price above $35 a share, a remarkable feat given AMC’s poor results.

However, while GameStop was able to capitalize on its short monkey-led squeeze, reaping huge cash gains by selling $1 billion worth of stock in April, AMC couldn’t follow suit. After failing to get shareholder approval to sell 500 million shares, it successfully raised $587.4 million with nearly 11.6 million shares sold in early June. A subsequent attempt on June 16 to secure shareholder authorization to issue an additional 25 million shares, which would have amounted to somewhere around $1.38 billion at the time, was canceled by the Monkey Army, which collectively owned the majority stake (and still continues to do so). ) So). Either out of fear of the resulting dilution or simply misunderstanding the situation, retail investors cut off a potential lifeline that would immediately lead to a significant reduction in AMC’s debt burden.

Could Cryptocurrency Add Momentum to the Transformation Plan?

Despite not having another major cash infusion, AMC is doing yeoman in its transformational effort. With some blockbusters returning to theaters and moviegoers returning to brick-and-mortar seats in profitable numbers once again, the company is increasing its revenue relatively significantly compared to the crash of 2020. It is also working to trim its losses, trimming its net loss in the third quarter of 2020. From $356 million to $114 million in 2021, or about 68%. Its net cash flow may turn positive in the fourth quarter. While still well below the true long-term viability, the gains are impressive given AMC’s previous long slide toward bankruptcy. And with enough luck and good management, the company may eventually return to the path of sustainable growth.

If equity issues are a ban on increasing the “war fund” and paying off debt, AMC’s new crypto policy may step in to help plug the hack. On November 12, CEO Adam Aaron tweeted that he had “breaking news.” In detail, he said that AMC is now “proudly” accepting — with the addition of “drumroll, please” — several of the leading cryptocurrencies, specifically. Bitcoin (CRYPTO: BTC)And Bitcoin Cash (CRYPTO: BCH)And Ethereum (CRYPTO: ETH)And Litecoin (CRYPTO: LTC). He also said that the company will start accepting meme coins Dogecoin (CRYPTO: DOGE) next one. Several of the cryptocurrencies he named have soared in the news, as blockchain investors are eager for more real-world use cases for their digital currencies.

On the surface, the addition of some new payment methods does not seem very important. Sure, some would argue, anyone paying with crypto can pay with cash, check, credit or debit card, so where’s the advantage? The answer is that many of the WallStreetBets monkeys are also from generations with a keen interest in cryptocurrency, such as millennials or the oldest group of Generation Z. It seems likely that at least some, and perhaps many, of AMC’s retail investors and contributors will choose it. To pay with cryptocurrency when they go to the theatre.

Payments received in cryptocurrency differ from regular payments in that AMC is supposed to choose to keep virtual currencies in their digital wallets rather than convert them immediately into cash. And if the cryptocurrency market shows anything, it is that at least the major cryptocurrencies, unlike the large number of “altcoins” that can be discarded, inevitably increase in value over time – sometimes gaining exponentially in a short period of time. Bitcoin, the global leader in the cryptocurrency space, has demonstrated this phenomenon over the past 12 months, jumping more than 300% to an all-time high of around $67,000.

If AMC can get a large amount of cryptocurrency in paying for movie tickets, it can hold these digital assets in its wallet until it reaches all-time highs, which could double or triple its profits from these particular sales just by owning “diamond hands” (i.e. holding and rejecting cryptocurrencies) for a few quarters before exchanging cryptocurrencies. Cryptocurrency volatility makes this strategy somewhat risky, but it can also be a way to “get more out of your winnings” on ticket sales.

Accepting cryptocurrencies doesn’t change the rules of the game, but it could provide a little extra cash in AMC’s quest to stop being mere meme stock and once again become a stock in movie theaters. The crypto-ticket policy may represent another small but useful step as AMC slowly makes its way into a more bullish future.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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