AMC stock sells off again as CEO pay deal may be blocked

AMC stock fell on Friday in line with the main indices as equity investors headed for cover after a shockingly high CPI number. We seem to be constantly writing about shockingly high CPI prints this year, and finally the equity market may be taking the hint. This is a bear market, so get on with it and act like one. The S&P 500 was doing its best to fool us into a buy-the-dip philosophy again as it stalled at -17%, so just short of an official bear market of -20%. Fool me once, shame on you, fool me twice, shame on me. This is the second chance for buy-the-dip investors to get out square before it is too late and gets properly ugly. 

This, unfortunately, overpowers some sector-specific good news for AMC with a strong showing from Tom Cruise's latest release Top Gun: Maverick with Jurassic World: Dominion not far behind. 

AMC box office booms

Top Gun Maverick continues to post huge numbers, making it Tom Cruise's biggest opening movie ever. The latest data shows that after a huge opening week of $295 million, the second week's fall-off did not materialize as per the normal course, and ticketing held up well. With another blockbuster set for Jurassic World: Dominion, takings are strong for the cinema chain.

AMC CEO pay deal voted against

Institutional Shareholder Services (ISS) has come out against a new pay deal for CEO Adam Aron, which is due to be voted on at the next annual meeting. ISS is a pretty influential shareholder group, and voting against a CEO compensation package is relatively unusual but not unheard of. Aron has been incredibly well rewarded for his tenure at AMC during the pandemic period. In 2021 he was paid nearly $19 million, and he got a $3.75 million bonus right when the company had laid off a large part of its workforce due to Covid-19.

It must be admitted that he did manage to steer AMC through the probability of it going bankrupt and come out the other side, so far at least. While it seemed odds-on that AMC would go the way of Chapter 11 during the pandemic, the CEO astutely took advantage of the massive wave of meme stock money that flowed into the company's shares. Aron raised cash and refinanced debt to get through that period intact. All is not plain sailing, however, as the last attempt at raising money through a dilutive share placing was voted down by shareholders. This leaves AMC vulnerable to the coming downturn. It has too much debt and deferred leases that will soon come due.

AMC debt load remains high, bonds trade at junk

We remain highly negative on AMC as the market takes an increasingly negative view of companies mired with high debt loads. The bond market is pushing yields ever higher, meaning debt refinancings will become ever more expensive. When inflation finally takes the box office with it, things could turn south quickly for AMC. It is not likely until 2023, but the next two years will be tough to survive in our view. Our most recent note from May 20 remains in situ.

As I wrote last week: "AMC will be in big trouble with its debt pile. It has several deferred lease payments and debt repayments due in 2023 and 2024. It will need to raise money. It will struggle to do so in fixed-income markets as its debt is trading at junk status. The 2026 bonds are yielding over 20% and trading at less than 70 cents on the dollar. That is default level stuff. AMC owes $272 million in rent and has an upcoming refinancing due. AMC said in its latest earnings it is burning $223 million per quarter. Its cash pile from stock sales will last about a year at that rate. Investors have already rejected more share dilution, so options will be limited."

I just checked the latest bond quotes for AMC, and they have not changed for the better. Bonds expiring June 2026 are trading at $0.71 on the dollar and yielding 21%, while those expiring November 2026 are trading at $0.50 on the dollar and yielding 26%.

AMC stock technical overview

AMC's weekly chart below puts it all in perspective. Was it all just a dream? AMC shares are nearly back to where it all began, but there is a bit more to go.

AMC chart, weekly

AMC stock forecast

AMC stock's daily chart below shows us just how weak the power of retail has become. The AMC apes are nearly no more. I know many of you reading will be angered by that statement, but that is the reality. Look at each spike: they fail at lower and lower levels. That is a classic sign of falling momentum. $8.95 will be tested soon, make no mistake about that. This could get worse and is unlikely to get better.

AMC chart, daily