AMC’s popularity as a meme stock hasn’t fixed its core business

AMC’s CEO has framed its stock’s success as a Hollywood epic, but most moviegoers aren’t back yet …

Adam Aron has a knack for the dramatic. In a second-quarter earnings call for movie theater chain AMC Entertainment, the chief executive likened his company’s financial saga during the pandemic to an adaptation of an epic cinematic tale, one whose happy ending is still being written.

“AMC’s journey through this pandemic is not finished, and we are not yet out of the woods,” Aron said in a press release on Monday (Aug. 8). “However, while there are no guarantees as to what the future will bring in a still infection-impacted world, one can look ahead and envision a happy Hollywood ending to this story. We would like to think that someday when a movie is filmed about AMC and COVID, its title will be one compelling word, ‘Recovery.’ But, only time will tell.”

On the earnings call, Aron said AMC “crushed it,” although numbers are still well off their 2019 peak. Capacity utilization, the number of tickets sold relative to seating capacity, rose to 61% of its pre-pandemic numbers in Q2, and is on track to hit 68% so far in Q3. Revenue rose as well reaching $444.7 million in the second quarter, up from just $18.9 million during the same period in 2020 as the pandemic intensified. Worldwide attendance reached 22 million for the quarter, up from just 100,000 in Q2 2020.

An audience of meme stock investors

Aron spoke to a very specific audience during the earnings call: retail investors who own a whopping 80% of shares, a rate far higher share than most stocks. Unlike chief executives who cater to the hedge funds or pension funds that own most of their shares, Aron has welcomed retail investors from platforms like Reddit (or “apes” as they call themselves).  While executives at GameStop, another meme stock darling, have practically ignored their online popularity, Aron is the rare Wall Street executive who has embraced his company’s newfound status as a financial meme (and his own nickname as a “silverback” among his stock’s most devoted fans).

While AMC may be popular on Discord, Reddit, and YouTube, but that hasn’t exactly put butts back in seats. AMC’s financials bested analyst estimates for quarterly revenue, but Aron acknowledged AMCs key financial and attendance metrics were down at least 50% compared to the same period in 2019.

To change that, the theater chain has made some strategic moves capitalizing on the $1.25 billion raised through new stock sales: hosting live viewings of sporting events, paying off corporate debts, and taking over some shuttered ArcLight and Pacific theaters. Yet its core business still depends on lifting pandemic restrictions and closures, exclusivity deals with movie studios increasingly reliant on streaming or at-home releases, and renewed interest from moviegoers. On the earnings call, Aron announced a new exclusivity deal with Warner Bros. in 2022, a hopeful signal for times ahead.

As the delta variant of Covid-19 emerges as a serious threat in the US and many other countries, AMC’s core business is once again under threat. But it’s in a better position than a year ago. AMC has paid down some of its mounting debt, and amassed more than $2 billion in reserves to weather the storm. Aron promised investors that he will maintain a share of AMC stock equal to eight years of his salary, a measure he is proposing to the board along with mandates for top executives at the company.

“We’re not out of the woods yet,” Aron said. “But there’s a light at the end of the tunnel.

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