Topline
Shares of AMC soared as much as 18% in Tuesday trading following an unconfirmed report that Amazon was nearing an acquisition for the struggling movie chain and one-time meme stock darling, though analysts covering the companies characterize such a deal as far-fetched.
AMC investors bought into hype of a potential sale.
Key Facts
AMC stock soared to as high as $5.50 after the Intersect, an upstart publication run by Los Angeles Times veteran Joe Bel Bruno, reported Amazon is exploring an acquisition, a plan purportedly spearheaded by executive chairman Jeff Bezos; Fox Business reporter Charles Gasparino later reported Amazon has interest in AMC but has made no form of takeover offer, and there “may never be” a deal.
AMC’s share price closed at $5.15, up just over 13% from Monday.
An Amazon spokesperson said the company doesn’t “comment on rumors or speculation,” characterizing the reports as the latter (AMC did not immediately respond to Forbes’ request for comment).
An Amazon acquisition of AMC is “extremely unlikely,” Wedbush analysts Alicia Reese and Michael Pachter wrote in a Tuesday note to clients, citing the cinema chain’s massive $5 billion debt load.
If it wanted to build its brick-and-mortar movie presence in the U.S., Amazon would likely instead target cheaper to acquire Regal Cinemas locations after its parent company Cineworld filed for bankruptcy, Wedbush suggested.
Tangent
Shares of Amazon were little affected by the buzz, but two stocks closely intertwined with AMC – AMC’s landlord EPR Properties and film technology partner IMAX – gained more than 3% apiece on the acquisition hopes. An AMC sale would be a “big windfall for EPR,” Raymond James analyst RJ Milligan wrote in a Tuesday note, suggesting it would calm fears for the commercial real estate firms should its tenant AMC continue to burn through cash.
Key Background
Bloomberg reported in November Amazon planned to commit $1 billion annually to bring about a dozen original Prime movies to theaters each year. AMC has lost more than $100 million in each of its last 12 quarters, a dubious stretch coinciding with the Covid-19 pandemic. The company teetered on the edge of bankruptcy in 2020 as it navigated stay-at-home orders, but was at least temporarily saved by a massive stock rally among retail investors in 2021, surging more than 600%.
Further Reading
Amazon May Buy Distressed AMC Theater Chain in Seismic Hollywood Streaming Shift (The Intersect)
Amazon Plans to Invest $1 Billion a Year in Movies for Theaters (Bloomberg)
Source: https://www.forbes.com/sites/dereksaul/2023/03/28/amazon-acquisition-of-amc-is-extremely-unlikely-analysts-say-but-amc-shares-still-soar-13/