AMC (AMC) CEO Adam Aron is preparing to go on a shopping spree if struggling theater operators begin to sell their locations amid financial struggles.
“I think there’s going to be an opportunity for us to pick up theaters quite inexpensively and pick up really high-quality theaters and potentially quite profitable theaters,” Aron said on Yahoo Finance Live (video above). “Right now, because of the unique position we’re in, that we have liquidity and a lot of our competitors do not, I think we’re going to be able to actually pick up more very fine locations and do it at bargain basement prices.”
Movie theaters tried a range of strategies to reengage customers after pandemic shutdowns and a surge in direct-to-consumer entertainment that prompted some studios to release box office titles directly on streaming services such as Netflix (NFLX), HBO Max (WBD), and Disney+ (DIS).
But a weak box office lineup in the third quarter didn’t make that comeback story any easier for the industry, despite the best efforts of Dwayne “The Rock” Johnson in “Black Adam.”
“There are a number of smaller movie circuits that are in real trouble because they didn’t raise the kind of money that we raised during the pandemic,” Aron said. “And they’re running on fumes.”
In September, Cineworld — the parent company of Cinemark, Regal, and Picturehouse theaters — filed for Chapter 11 bankruptcy and commenced a “real estate optimization strategy.” The process was initiated after lighter-than-expected traffic to its theaters slowed recovery efforts amid the pandemic.
Meanwhile, AMC capitalized on the visibility it received after a short squeeze briefly catapulted the stock in January 2021. The movie theater chain executed strategically timed equity offerings to raise additional cash.
“AMC raised a lot of money in 2020 and 2021,” Aron said. “We raised $2.25 billion by selling stock into the marketplace. And so when you look at our cash reserves, at the end of the third quarter, we had $900 million in liquidity.”
Nevertheless, the CEO’s willingness to spend on theater locations is counterbalanced by AMC’s own closures of underperforming venues. Since the pandemic began, AMC has reduced its footprint by 57 locations overall, closing 106 locations and opening 49 new venues.
That hasn’t deterred Aron, who sees a connection point for moviegoers returning to the theater experience as well as a larger addressable market through new investments, which include a mining company, AMC-branded credit cards, and a recent partnership with Zoom (ZM).
“We think that’s going to be a real boost for our meetings business,” Aron said on the company’s Zoom Rooms partnership, adding: “that’s the next one to come after our investment last winter in Hycroft, the gold and silver mine out in Nevada.”
Brad Smith is an anchor at Yahoo Finance. Follow him on Twitter @thebradsmith.
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Source: https://finance.yahoo.com/news/amc-ceo-says-theater-competitors-running-on-fumes-may-purchase-locations-at-bargain-basement-prices-131434976.html