Between “Barbenheimer weekend” and the AMC court decision, it was a busy day for movie theater stocks. Let’s recap. 👇
First, Warner Bros. said “Barbie” logged the highest opening of 2023 with $155 million in sales during its first three days in theaters. Universal’s “Oppenheimer” snagged $82.4 million during its debut, bringing what’s likely to be the highest-grossing weekend of the year to a total of $237.4 million in domestic sales.
Industry leaders say that crowds recognized something special was happening with these films and wanted to be a part of it. It also helped that both films had star-studded casts and Rotten Tomatoes scores above 90%. 🤩
The success of this weekend provided a significant boost to an industry plagued with issues ranging from changing consumer behavior, record competition and rising costs, and labor strikes putting development on hold. That’s likely why shares of movie theaters only experienced a short-term pop, as many structural headwinds remain.
Meanwhile, shares of AMC Entertainment jumped more than 30% as the market reacted to Friday’s news. A Delaware court judge did not approve the $100+ million settlement proposed by AMC to shareholders who alleged the company used $APE shares to circumvent the will of common stockholders who opposed the issuance of new shares. ❌
The long-awaited decision was expected to fall in AMC’s favor (resulting in further dilution). However, the judge’s decision to strike down the settlement offer sent shares soaring nearly 100% after the close on Friday before settling back down before today’s open.
Ultimately, it creates a problematic situation for the company. In the short term, the decision is accretive to share prices because it means less dilution. However, over the long term, the company has said the inability to raise more equity funds will limit its ability to turn operations around.
CEO Adam Aaron posted an open letter to investors today addressing this very issue. Ultimately, the company will have to work with the plaintiffs to address the court’s concerns and reach a settlement. Until then, much uncertainty remains about the company and its $AMC and $APE shares. 😕
