AMC Won’t Consent To Tokenized Stocks Under New SEC Rules, CEO Says: Tokens Let Brokers ‘Fool Around With Our Balance Sheet’

• According to Aron, the trend of tokenizing stocks accelerated by Robinhood is “terrible.”
• He warned that tokenization could make it harder for companies to control their capital structures and manage their own financial strategies.
• The CEO said the SEC “agreed with us” when it issued rules shortly after his social media criticism of Robinhood’s tokenization plans.

AMC Entertainment (AMC) CEO Adam Aron said on Thursday that the company would ‘say no’ to having its shares converted into digital tokens in the U.S., escalating his fight with Robinhood Markets (HOOD).

“We think this Robinhood tokenization trend is terrible,” Aron told CNBC in an interview. He said new rules from the Securities and Exchange Commission (SEC) require companies to agree before their stock can be tokenized, and that AMC plans on “saying no.”

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“We’re going to be saying no to tokenization.”

– Adam Aron, CEO, AMC Entertainment

Aron said companies should decide how their own shares are issued and traded. “We think that companies should be in charge of their own capital structures, not a brokerage company trying to fool around with our balance sheet,” he said.

AMC stock edged 0.3% higher in early morning trade on Thursday. On Stocktwits, retail sentiment around the firm shifted to ‘extremely bullish’ from ‘bullish’ over the past day, accompanied by ‘high’ levels of chatter.

Why Is AMC CEO Against Stock Tokenization?

Aron stated that control over AMC’s shares and debt has been central to the company’s recovery. “Tokenization makes it more difficult for companies to control their own destinies, which we think is a secret to our success over the past five years,” he said.

The comments follow a series of social media posts in which Aron criticized Robinhood’s tokenization plans. He said the SEC “agreed with us” when it issued its rules shortly after his posts.

Aron pointed to AMC’s debt reduction as evidence of the progress the company has made. In 2022, two years after the COVID-19 pandemic forced theaters to close, AMC’s debt stood at 114 times its annual adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). 

He noted that, since then, AMC has paid down $2 billion of debt and refinanced another $4 billion, extending repayment dates by five to seven years. Aron expects the debt-to-adjusted EBITDA ratio to decline to between 4 and 4.5 times this year.

“That’s like a normal balance sheet,” he said. “It’s not quite investment grade, need to say, but it’s normal.” He called it “a miraculous performance.” AMC was recently upgraded by credit rating agencies, he added.

AMC Posts Another Record Quarter

Aron’s comments came after AMC reported record quarterly revenue and adjusted EBITDA for a second consecutive quarter. Third quarter (Q3) revenue increased 32% to $1.7 billion, beating the consensus estimate of $1.6 billion cited by Koyfin. The company reported earnings per share (EPS) of $0.13, slightly under the expected $0.14.

Aron also highlighted that AMC’s adjusted EBITDA rose 184% and attendance climbed 28%. He attributed the improvement to the economics of AMC’s theater business, which carries substantial fixed costs. 

According to the CEO, AMC’s profit jump stemmed from its high fixed costs. Once those are covered, much of each additional dollar of revenue becomes profit. “There’s no accounting tricks in this,” he said.

Aron also stated that moviegoers are spending more. He said AMC earns about $15 per visitor after costs, up from about $10 before COVID, helped by food, its A-List subscription program and movie-themed merchandise.

The AMC CEO expects a December box office of about $1 billion in the U.S., with releases including Avengers: Doomsday and Dune: Part Three.

AMC shares are up about 125% this year.

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