AMC reportedly in superior talks to refinance debt

A man walks past the AMC Georgetown 14 Theaters on June 3, 2021 in Washington, DC.

Almond Ngan | AFP | Getty Images

AMC entertainment accelerated its plan to refinance its debt, according to a new report from The Wall Street Journal.

The publication said the The cinema chain is in advanced refinancing talks with several interested parties to reduce the interest burden and extend the terms by several years. This follows comments from CEO Adam Aron earlier this month that one of his key goals for 2022 was to improve the company’s financial position.

An AMC spokesman declined CNBC’s request for comment.

AMC’s total debt tops $5 billion, but Aron has repeatedly cautioned investors that it has no maturities until 2023.

On Tuesday, AMC shares fell more than 4% on debt refinancing news. amid robust selling in the broader market.

AMC’s push to shore up its balance sheet comes as the company’s stock has fallen more than 40% year-to-date, reversing big gains that helped AMC avoid bankruptcy last year. AMC’s stock value was boosted in 2021 by retail investors who closely followed the stock on social media platforms like Reddit.

AMC has been caught up in the meme stock trading frenzy and was able to replenish its coffers through stock sales in early 2021, but twice failed to win shareholder approval to issue new shares in the company. That means the company can’t issue any more shares to pay off its debt.

Read the full report from The Wall Street Journal.

AMC shares hunch as CEO Adam Aron, CFO Sean Goodman promote inventory

An AMC theater is pictured in Times Square in the Manhattan neighborhood of New York City, New York, on June 2, 2021.

Carlo Allegri | Reuters

Shares in AMC entertainment collapsed nearly 7% on Friday after two company executives sold significant portions of their stock.

CEO Adam Aron sold an additional $ 9.65 million in AMC stock as part of his estate planning. a move he warned investors that he would be back in August. He sold 312,500 shares on Tuesday for an average of $ 30.86 apiece, according to a regulatory filing filed Thursday.

This sale comes a month after Aron sold 625,000 shares in the company for approximately $ 25 million. He still holds around 96,000 shares, excluding around 2.9 million shares to be issued in the future based on performance targets.

Separately, AMC’s chief financial officer Sean Goodman sold all of his 18,316 shares for approximately $ 565,000, according to a separate filing with the Securities and Exchange Commission. This excludes approximately 296,000 shares that may be issued as a result of Goodman’s continued business for the company, or approximately 293,000 shares that are tied to performance goals and objectives.

Aron recently announced that the company’s board of directors has approved a new equity policy for the company’s executives that requires them to hold a certain number of AMC shares. According to the new guideline, the CEO must hold his own shares or shares that have been awarded for at least eight years’ salary. The CFO must keep the salary in reserve for six years. Goodman’s untransferred shares meet this requirement.

AMC representatives declined to comment.

“I think that while Adam Aron was clearly expressing his intention to liquidate some of his position in AMC stocks by the end of the year, many investors were surprised by the extent to which he sold stocks between early November and mid-December” said Alicia Reese, an analyst at Wedbush.

“Of course, Sean Goodman has more shares since he sold in November, and all executives will continue to accumulate more shares as part of their compensation packages, but they are walking a fine line by taking advantage of the increased share price, while” private shareholders have committed to hold on at all costs, “she said.

Eric Handler, media and entertainment analyst at MKM Partners, noted that the stock is currently trading 30 times its estimated Adjusted EBITDA for the next year and 22 times its forecast for 2023. AMC’s historic valuation peaked at 9 times the metric, he said.

AMC shares topped $ 72 in June, an all-time high when the company was supported by millions of individual retail investors. In the past few months, however, the share has more than halved. On Friday, the stock closed at $ 27.44, down 6.9%.

Before this surge in new investors, the company’s shares hovered between $ 5 and $ 10, but fell to just $ 1.91 per share in January when it looked like AMC would not avert bankruptcy.

The “meme shares” rally helped the movie theater chain hit hard by the pandemic and laden with debt from previous acquisitions. The rise in inventory allowed Aron to raise enough cash to pay rents and even add more theaters. But even with diversified content like soccer games and concerts and the company’s ability to accept cryptocurrencies for tickets and concessions, analysts don’t expect AMC stock to hold this high level.

“The current price does not appear sustainable on a fundamental basis,” said Handler.[It’s a] very opportunistic way for management to get paid. “

AMC executives and board members had previously has dumped more than $ 70 million in stocks Year, according to a report from Bloomberg. While many of these sales were planned ahead of time by management, it means a massive shift for these executives who sold only a fraction of that amount in previous years.

67-year-old Aron is very transparent with investors and has repeatedly advised them that his stock sales are part of an estate plan to diversify his portfolio. Other AMC executives were less vocal about the reasons for their sales.

These stock sales occur at a time when insider selling has accelerated. A recent study by InsiderScore / Verity found that InsiderScore sold more than $ 69 billion worth of shares that year – a record high. The changes occurred when stock assets were increasing and at a time when Congress discusses significantly higher capital gains tax rates and changes in inheritance tax policy.

AMC Leisure (AMC) Q3 2021 earnings

The AMC Burbank 16 and the Batman bronze statue in Downtown Burbank.

AaronP / Bauer-Griffin | GC images | Getty Images

Shares in AMC entertainment lashed Monday’s extended trading after the company posted a smaller-than-expected loss in the third quarter.

Here’s what the company said, relative to Wall Street expectations, based on an analyst survey by Refinitiv:

  • Loss per share: 44 cents vs. 53 cents expected
  • Revenue: Expected $ 763.2 million versus $ 708.3 million

AMC posted a net loss of $ 224.2 million, or 44 cents per share, for the third quarter. That loss is well below the $ 905.8 million, or $ 8.41 per share, that they lost in the year-ago period. According to Refinitiv, analysts had expected a loss of 53 cents per share.

The cinema chain reported revenue of $ 763.2 million, surpassing the $ 708.3 million analyst had expected.

The company’s shares initially rose after the results were released. However, as of 5:20 p.m. ET, shares were down 4.3%. AMC stock was the focus of this year’s meme stock frenzy, rising more than 2.025% in 2021.

AMC said all of its domestic cinemas were open on September 30th, as was 99% of its international theaters. The cinema chain found that it welcomed 40 million guests again in the US, Europe and the Middle East in the third quarter thanks to new blockbuster titles and rising vaccination rates.

During the quarter, the company posted entry revenue to $ 425.1 million from $ 62.9 million in the year-ago period. Food and beverage sales also rose to $ 265.2 million from just $ 29.1 million year over year.

Still, AMC’s operating expenses exceeded revenue, causing the company to post a loss for the quarter.

“Our financial results continue to improve,” said CEO Adam Aron in a statement on Monday. “You can see and feel that our industry and our company are on the way to recovery and improvement. That is why we are optimistic.”

“However, despite this good news, we are still not where we want and need to be,” he said. “We would like to emphasize that nobody should be under the illusion that there are not more challenges ahead of us. The virus continues to accompany us, we have to sell more tickets in the coming quarters than in the previous quarters. “Quarter, and the adjusted EBITDA is still well below the level before the pandemic.”

At the end of the third quarter, AMC had more than $ 1.8 billion in liquidity, including cash and undrawn revolving credit lines. Aron said the company doesn’t expect to have to borrow under these lines of credit in the next 12 months.

This liquidity has allowed AMC to explore and integrate new revenue streams. The company has already acquired new theater rentals, started offering new content such as concerts and sporting events, and it expands into popcorn retail.

This is the latest news. Please check again for updates.

AMC reaches take care of Warner Bros. for 45 days theatrical exclusivity

AMC entertainment made an agreement with Warner bros. to present the studio’s entire Slate 2022 in cinemas for 45 days.

The world’s largest theater chain had shied away from Warner Bros. ‘ Decision to bring this year’s films to cinemas and via the streaming service HBO Max on the same day. These films included “Godzilla vs. Kong”, “Space Jam: A New Legacy” and most recently “The Suicide Squad”. It also includes the upcoming releases of “Matrix 4” and “Dune”.

AMC a similar contract with Owned by Comcast Universal last year, which guaranteed cinema exclusivity for at least 17 days before films could be streamed or made available on-demand.

“It is particularly gratifying to see Warner Bros hugging a theater window yet again,” said CEO Adam Aron during the conference call on Monday. “For us at AMC, it is particularly gratifying to be working so harmoniously with Warner Bros. again.”

Warner Bros. had already announced that it would return to pure theatrical releases in 2022 during last month’s conference call from parent company AT&T. It had also signed similar deals with Cineworld, the owner of Regal Cinemas, in April Cinemark in May. The financial details of these contracts have not been made public.

Jason Kilar, CEO of WarnerMedia, said during a conference call in July that theatrical releases will continue to matter to the company even if it only creates streaming content in the future.

While the hybrid release model was a necessity during the pandemic, there is no doubt that the strategy has eaten the box office revenue of all studios across the board. Big budget films made only a fraction of what they did in pre-pandemic times.

Having exclusive content in theaters can Help AMC to become profitable again. The company is aiming for the fourth quarter, but will only achieve that goal if the total domestic box office reaches $ 5.2 billion, said Aron.

While the theater chain reported revenue of $ 444.7 million in the second quarter, which was above analysts’ expectations, it nonetheless posted a net loss of $ 344 million. It’s an improvement over the $ 561.2 million loss recorded a year ago.

AMC Leisure Holdings Inc. Cl A inventory falls Friday, underperforms market

Shares in AMC Entertainment Holdings Inc. Cl A
AMC, -4.17%
lost 4.17% to $ 51.96 on Friday, which turned out to be an all-round positive trading session for the stock market with the NASDAQ Composite Index
COMP, + 0.81%
Up 0.81% to 14,639.33 and the Dow Jones Industrial Average
DJIA, + 0.44%
increased by 0.44% to 34,786.35. This was the second consecutive day of losses for the stock. AMC Entertainment Holdings Inc. Cl A closed $ 20.66 below its 52-week high ($ 72.62) the company hit on June 2.

The trading volume (89.3 million) remained 96.8 million below its 50-day average volume of 186.2 million

AMC Leisure Holdings Inc. Cl A inventory falls Thursday, underperforms market

Shares in AMC Entertainment Holdings Inc. Cl A
AMC, -4.34%
lost 4.34% to $ 54.22 on Thursday, which turned out to be an all-round cheap trading session for the stock market with the NASDAQ Composite Index
COMP, + 0.13%
Up 0.13% to 14,522.38 and the Dow Jones Industrial Average
DJIA, + 0.38%
increased by 0.38% to 34,633.53. AMC Entertainment Holdings Inc. Cl A closed $ 18.40 below its 52-week high ($ 72.62) the company hit on June 2.

The trading volume (57.3 million) remained 127.7 million below its 50-day average volume of 185.0 million.

Editor’s note: This story was created automatically by Automated insights, an automation technology provider using data from Dow Jones and FactSet. See our Market Data Terms of Use.

Opinion: AMC Leisure’s Share Value Is Being Manipulated

Wall Street has been ruled by private investors for almost six months. Even though private investors have been investing their money in the market for over 100 years, they have never had such an enormous impact on share prices as they did in 2021.

More specifically, retail investors on Reddit, Twitter, and other social media platforms have teamed up to buy stocks and call options out of the money on stocks with very high short interest. The goal of these retail investors is twofold. First they want a short press – a short-term event that pushes short sellers (ie, pessimists who bet on a stock’s downward movement) to exit. Second, since most short sellers are institutional investors, they want to “stick to the colors,” so to speak.

Image source: Getty Images.

“Monkeys” went crazy for AMC

Although GameStop was the representative of “Reddit-based trading” for months, it was replaced by the cinema chain AMC entertainment (NYSE: AMC)which has produced a higher return since the beginning of the year.

The army of retail investors who own shares of AMC, collectively known as the “monkeys” believe that a big short squeeze is waiting for the stock. Indeed, AMC has seen the number of short stocks spike in recent months. From June 15, 2021, Morning star listed 85.08 million shares as vacant, relative to a free float of closer to 449 million shares.

In addition to seeking a short squeeze, Monkeys believe Wall Street is deliberately manipulating AMC’s stock price. Read any message board and you will see multiple discussions about dark pool trading of AMC stocks, the implications of naked short selling (i.e. short selling of stocks that don’t exist), and the idea that hedge funds (kindly referred to) as the “hedgies” seek out bankrupt companies by dumping them into the ground.

In other words, AMC’s retail investors see themselves as a mission to embrace the manipulation of Wall Street.

But the kicker is that manipulation is taking place. It’s not coming from Wall Street, however. In my opinion, AMC’s retail investors appear to be the real source of stock price manipulation.

A person touching their smartphone, which is displaying a volatile stock chart.

Image source: Getty Images.

AMC is being manipulated, but not by Wall Street

As early as June 1934, the Securities Exchange Act was passed to cover secondary trading in stocks, bonds, and debentures in the United States. There is a section on market manipulation in this 367-page law that governs what is and isn’t legal in the investment world. Section 9 (a) and 9 (a) (2) state (Page 87, for those interested):

It is unlawful for any person, directly or indirectly … to carry out, alone or with one or more other persons, a series of transactions in a security that is registered on a national stock exchange, a security that is not so registered or in connection with any security Swaps or securities swap agreements in respect of such security that cause actual or apparent active trading in such security or increase or decrease the price of such security to cause others to buy or sell such security.

In other words, it is illegal to defraud other investors by doing anything that would artificially affect the price of an underlying security. AMC investors will tell you that they simply “like the stock” and that “it’s not illegal to buy and hold a company”. I agree and so do the law. If AMC investors like the stock, they can buy as much as they want and hold for as long as they want.

However, their actions on social media seem to indicate intentionally influencing the supply and demand for AMC stock. In particular, Reddit traders are using a combination of hype, deliberate ignorance of fundamental operational data, and misinformation to artificially drive AMC’s share price up.

How can I support these claims, you ask? Just search Reddit or Twitter for posts on AMC. You don’t have to look far to find the misleading or harassing tactics used to enforce what appears to be an honest (but coordinated) compliance. Pump-and-dump scheme.

A person texting on their smartphone while a chat bubble hovers over their device.

Image source: Getty Images.

AMC is constantly being hyped on social media

To begin with, AMC monkeys use absurd price targets and post thousands of times on social media boards every day to keep interest high. The most common tactic here is to keep proclaiming that a short squeeze is coming (despite no guarantee that one will happen) and ditch an absurd stock price level to keep less informed investors interested.

You can often find people on Twitter trying to get a hashtag version of the “AMC100k” or “AMC500k” trend. In other words, these people are trying to trick unsuspecting investors into believing that AMC will somehow go from $ 2 in January to $ 100,000, or $ 500,000 per share. For some context here, $ 100,000 per share would be a market cap that is well over double the US annual gross domestic product (GDP), while a $ 500,000 share price would be nearly three times global GDP (more than $ 250 trillion). Apple is currently the world’s largest publicly traded company with a market capitalization of $ 2.2 trillion.

These whimsical price targets may sound harmless, but they are a straightforward attempt to create artificial support with no fundamental support.

A person holding a magnifying glass over a company's balance sheet.

Image source: Getty Images.

Efforts to present income statement / balance sheet data are being dashed by the social media mob mentality

In my view, retailers are also manipulating AMC’s stock price by using social media tactics to stamp out any discussion of the company’s operational performance or balance sheet. And the reason is simple: the presentation of income statement or balance sheet data would completely destroy the purchase thesis of this company – and the manipulators know that.

Any attempt to discuss the company’s operating performance or its more than $ 5.4 billion debt will be posted on Reddit, Yahoo! and other message boards were quickly rejected and referred to as “FUD” (fear, uncertainty and doubt). Hence, the only message new investors will see is the carefully crafted message that AMC portrays as a short squeeze candidate with no obvious drawbacks and tens of trillions in market cap up.

But this never-ending confirmation bias doesn’t come close to telling the full story. While AMC has raised enough capital to stave off bankruptcy in the short term, the company’s 2027 bonds are nowhere near par value, suggesting bankruptcy still remains a very real possibility (albeit years later). This is not a FUD. That’s a fact.

In addition, ticket sales for the film industry were all rolled into one pretty steady decline in sales for 19 years. Even as AMC builds its market share, the industry has continued to shrink and is likely to continue to shrink as streaming and movie exclusivity goes against AMC.

Besides, the company is not profitable and so is it $ 324 million burned in cash only in the first quarter.

This is important information that investors should know. If you still want to invest in AMC, that’s fine. But deliberately suppressing and hiding specific facts from unsuspecting investors while hyping what is essentially hype-driven propaganda does not allow people to make an informed investment decision.

A person holding cash behind their back and keeping their fingers crossed at the same time.

Image source: Getty Images.

Misinformation and lies are the basis of this movement

The most egregious sign of manipulation, however, can be seen in the way AMC monkeys do Spread misinformation to encourage this pump-and-dump scheme. Below are some of the examples you will see on a regular basis and why they are not true.

  • Monkeys saved AMC:“Not correct. AMC saved itself by issuing hundreds of millions of stocks and high yield debt earlier this year. Camaraderie is essential to keeping other retail investors informed, which is why this falsehood has persisted for so long. The fact is that the operational performance of AMC and only its operational performance will determine whether or not it will be stored.
  • Short-selling hedge funds drive companies bankrupt:“Wrong. Short sellers and buyers are just people hoping for different results. That result is ultimately determined by the company’s operational performance. No matter how many stocks institutional investors short sell, they cannot bankrupt a company. Anyone who does says you are lying to yourself otherwise.
  • Hedge funds control the MSM:“Wrong. AMC retail investors want you to believe that every institutional investor is evil and that there is an ongoing battle between David and Goliath. The fact is, hedge funds don’t control the mainstream media (MSM). This is misinformation. Maintaining retail investors to keep less informed investors informed.
  • Hedge funds fill your pockets:“Wrong. Monkeys also routinely claim that any journalist, analyst, writer, television personality, etc. who are not exactly on par with them is paid by hedge funds or has hedge fund affiliations, this is a defense mechanism to keep the ‘us against them “Maintain the mentality that is required to keep this pump-and-dump scheme going.
  • Basics don’t matter:Wrong. A company’s operational performance and balance sheet are always important. And if you don’t think they are, speak to them Washington Prime Group Shareholders who saw half of their investment fizzle out overnight when the company filed for Chapter 11 bankruptcy protection on June 13. Washington Prime was touted by Reddit traders just hours before filing for bankruptcy for its high short squeeze potential.

In my opinion, AMC retail investors are hypocrites. They preach for transparency and rail against unsubstantiated manipulation on Wall Street, but purposely block the whole story on message boards and continue to spread misinformation to manipulate the price of AMC.

I have no idea how long the AMC stock price can remain artificially inflated by retail investors. What I do know is that every pump-and-dump scheme in history has collapsed at some point. AMC will be no exception.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.

Fascinated by shopping for inventory in Aprea Therapeutics, RA Medical Techniques, AMC Leisure, Torchlight Vitality Assets, or Appharvest?

NEW YORK, June 16, 2021 / PRNewswire / – InvestorsObserver issues critical PriceWatch Alerts for APRE, RMED, AMC, TRCH, and APPH.

To see how InvestorsObserver’s proprietary rating system rates these stocks, check out InvestorsObserver’s PriceWatch Alert by selecting the appropriate link.

(Note: you may need to copy this link into your browser and then the [ENTER] Key.)

InvestorsObserver’s PriceWatch Alerts are based on our proprietary valuation method. Each stock is valued on the basis of short term technical, long term technical and fundamental factors. Each of these ratings are then combined into an overall rating that determines the overall suitability of a stock for an investment.

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AMC Leisure’s Strikes Make Sense

AMC Entertainment (NYSE:AMC) files to sell 11 million shares, sending the stock down 30%. ExxonMobil (NYSE:XOM) loses a proxy fight as an activist firm gains a third seat on the board of directors. Motley Fool analyst Bill Mann, with host Chris Hill, analyzes those stories and FireEye‘s (NASDAQ:FEYE) decision to sell part of its business (and its name) to a private equity firm.

To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

https://www.youtube.com/watch?v=if-fAVWzjVE

This video was recorded on June 3, 2021.

Chris Hill: It’s Thursday, June 3rd. Welcome to MarketFoolery, I’m Chris Hill, with me today, the one and only, Bill Mann. Good to see you, my friend.

Bill Mann: How are you? How are you celebrating Mark Levin’s birthday today?

Hill: Mark Levin, happy 40th birthday to Mark Levin. Maybe the greatest fake driver’s license in film history.

Mann: You know, it’s only one name, right? Yeah. If you look at the driver’s license, his birth date on his fake ID was June 3rd, 1981. That means that Mark Levin is today 40 years of age. I will be celebrating later. I don’t know about you.

Hill: If you’re looking for a movie to relax with over the weekend, I will just say SuperBad, 88% on Rotten Tomatoes.

Mann: Yes, and the 12% are the ones who found the launch to be a bit much, which I can understand.

Hill: Understandable.

Mann: Yeah.

Hill: We’ve got an energy story that I don’t understand. We have a cybersecurity story that I really don’t understand. But we’re going to start with the mayhem that is AMC Entertainment. People on Reddit are buying shares of AMC Entertainment, but you know who is selling? AMC Entertainment.

Mann: I like the fact that you’re setting this apart and suggesting maybe you do understand this one.

Hill: I understand the optics of it anyway, but yeah, the company came out, they filed to sell more than 11 million shares, and the stock is down more than 30% today.

Mann: Right now, at the time that we’re speaking, it could end anywhere. Even at this point, AMC stock is up more than 100% for the week. The company came out and said, we are going to take advantage of the market and they were very clear in their filing. It was interesting. They said there is no business reason for this level of volatility, there’s no business reason for this price. We are going to sell and we are going to go out, use these proceeds to try and buy up some irreplaceable movie assets, which is great. This is exactly what they should be doing. What’s so funny to me about the meme stocks in general, take GameStop for example, is that the company is almost irrelevant to the story. At no point do you hear, “Hey, the CEO is doing X”, you just don’t hear these things. The only thing that really bothers me about this, Chris, though, is that yesterday, the stock went up, and at one point, it was up 120% on the day, which is a lot, and AMC came out and said we’re going to provide free popcorn and other benefits to investors knowing full well, had to, that they were going to be releasing something today, saying they were selling shares. That to me is just distasteful. Everything else about this I find fine.

Hill: I’m going to go in no particular order, I agree with you. It is distasteful the timing of that. That said, I think everything else that management is doing here makes sense. They are taking advantage of an inflated stock price. … They’re being very clear saying, “Look, here’s why we’re selling that.” If you’re a lawyer on staff at AMC Entertainment, you’ve got to be happy with the way they are handling this part of it.

Mann: You know, it would be awesome. Unfortunately, these things are bound by legal language. If they said, we’re selling 11 million shares, wouldn’t you? What do you expect us to do? The stock is down quite a bit today. Who knows where it will end up? This is a company that has not traded on its fundamentals. There is no reason that AMC, which lost $4 billion in 2020, which makes sense because the theaters were closed, it lost $150 million in 2019 when they were open. I have no explanation for this other than the market has lost its mind. But AMC is right to go ahead and say, “Well, OK, if you dare us to sell some, we’re going to sell some, and we’re going to keep selling until the price gets back to being in an irrational place, and at which time, we will have a lot of cash on hand.”

Hill: I said this the other day. This is unlike some of the high-flying Cloud-based Nasdaq stocks that have come down 20%, 30%, 40% off of their highs over the last few months, those are at least growing businesses in growing industries. When you look at the business of movie theaters, the most important trend is the fact that for the past 20 years, steadily, year-over-year, incrementally fewer people are going to the movie theater. Now, there are years where the overall box office receipts increase, but that’s due to price increases, that’s not due to more bodies coming into the theaters so unless AMC has a plan to get more butts in the seats, I’m not sure how this has a happy ending.

Mann: Well, not only that, but the way that movie theaters make money is off of concessions, and for movies that have been there for more than three weeks. For the first three weeks and this has been pretty much contractual across the board, the studio gets all of those ticket revenues, they all go and then you start to have some negotiated split. What happened during 2020, and it’s not the movie theater’s fault, is that that relationship was broken. We don’t have any guarantee that that’s going to come back. We had some big hits that literally went straight to streaming. I don’t know. The good news is that I think that the business case for AMC is almost irrelevant for what’s going on, it’s a meme, a $20 billion meme, so good luck, but I don’t really see the business case, but I completely see why AMC will say, “Look, if you give us access to enough money and enough resources, we can maybe build a business case.”

Hill: Let’s move on to ExxonMobil; an Actavis firm called Engine No.1, has won a third seat on Exxon’s Board of Directors, Actavis buying up shares and pushing for change in a given business is not unusual. What is unusual in this case is that Engine No.1 doesn’t have a 9% stake in ExxonMobil or a 5% stake, they have a 0.02% stake in this company. How is this happening? How are they able to affect change, at least in terms of getting people on the board when they own slightly more shares of ExxonMobil’s than I do?

Mann: Not many more. We know you’re a big deal. What a disaster this is for Exxon’s management team, particularly the CEO, Darren Woods. This is the most expensive proxy battle in history in the United States. The amount of money that was spent on competing on the Board slate, the company supported slate of directors vs this renegade set of directors, the activist investors, they had backing from a number of large pension funds which are huge investments including CalPERS, which is the California pension fund, CalSTRS which is the education pension fund for the state of California, New York Common Retirement Fund, a lot of big pension funds also got involved and supported the Engine No.1 Mobil. This is all about the activists believing that Exxon has not done enough, both from an environmental standpoint and from a business standpoint to move itself to carbon-neutral technology. That this is a path that seems obvious to them and if Exxon, with all of its resources moves there first, they will probably be able to compete. That is the argument and that is the theory of the case for these activist investors. Although Engine No.1 is not a big owner of Exxon, these are no mooks. It’s run by a guy named Gregory Goff, who used to be the CEO of a company called Tesoro, which is a oil and gas company, he had absolutely tremendous returns. There was a senior strategist from Google X, former Chief Executive of Vestas Wind Systems. These are people who know the business. This is a really really credible group that’s been put together.

Hill: Yet I’m looking at ExxonMobil stock up nearly 50% year-to-date, obviously. There are reasons for that that have nothing to do with the Board of Directors.

Mann: Oil prices definitely.

Hill: Right. Where do you think this goes over the next six to 12 months? I realize I’m asking you to look into your crystal ball, but in terms of the direction of ExxonMobil’s business, what should people expect?

Mann: Well, a third board seat is a huge thing. Two are enough to be loud. Three is enough to be transformational. I think you’re going to see Exxon move very quickly toward the exact thing that Engine No.1 is speaking of. In fact, you’re already seeing them, they’re coming out with reports of how they’re going to make their upstream carbon-neutral or moving toward those targets. I think it’s going to happen a lot faster. It would not surprise me. This is such a rebuke of the current management team. It would not surprise me if Darren Woods steps down pretty soon. He staked his reputation on winning this proxy battle and did not. There’s going to be some changes, and if that happens, these new board members will be instrumental in picking the next CEO and management team.

Hill: Shares of FireEye are down 15% today because the company is selling its products business and its name to a private equity firm, Symphony Technology Group, for $1.2 billion. The Cloud security network and email products will go to this private equity firm. The remaining cyber forensics business is going to be called Mandiant Solutions. What is going on here? I can’t recall whether it’s this industry or any other industry. I can’t recall ever seeing a story like this where they’re not just spinning off part of their business. What is left and what would you rather be the owner of?

Mann: As we are in the studio for this, the stock is down about 15%. Basically on this news, $1.2 billion sale to Symphony Technology Group, which is a private company. I actually like the deal. I understand exactly why the shares would be down this much. Because when you’re selling that big of a chunk of your business, there are a lot of shareholders who are owning your stock because of that chunk of business. It makes perfect sense to me that the market woke up today, it was like, “What I am going to do is step back because what will continue in place is not what I thought was going to be there.” But CEO Kevin Mandia has been very clear about the opportunity in cyber forensics. We see with these cyberattacks that there are going to be huge opportunities and they’re going to necessitate a coordinated government-led program. He wants to make sure that his company, Mandiant Solutions is best placed so that they can be a part of that conversation. I get why they would make this deal. I also get why the market doesn’t seem to like it at all. But I’ve never seen a company sell its name before.

Hill: We’ve talked before about the growing opportunity in the cybersecurity industry. I think over the last few years, it has definitely moved into that category for individual investors. If you’re building out your portfolio and you’ve got 25 stocks, I think cybersecurity is now in that category where you need to look at your portfolio and say, ”Where do I have exposure to the cybersecurity industry?” If you don’t have it, I think you should go out and find it.

Mann: Yeah, 100%.

Hill: But in this case, it sounds like within that industry, the CEO is basically saying, I’m putting all of my chips on cyber forensics and I’m going to take the short-term hit. This is where the growth engine is going to be.

Mann: Yeah, there’s $1.2 billion in cash that they’re going to have on hand as well.

Hill: Let me just add, for a company with a market cap of $4.5 billion, so it is not an inconsequential amount of money.

Mann: They have some firepower. They have some liquidity that they can do some things with. I think actually with cybersecurity the nature of the business, and we get asked this all the time, what are your favorite cybersecurity companies? I actually would take a basket approach and own several, or if not many of them, and think of them as one, two, or three positions in your portfolio. The reason is this, cybersecurity becomes more powerful the more players there are. In a lot of industries, if you go in as a hacker, that you only have to figure out one company’s protocols, then maybe I don’t know that that creates the same level of security as multiple ones with different levels of expertise. We don’t ultimately know which one is going to win. This is an area where I think it is incredibly important because unfortunately, the jerk element of this world is not slowing down. They are doing some really horrible things that have cost all of us whether we know it or not, a lot of money. I think you have to be involved with the companies that are on the front line in fighting the hackers and the cybersecurity terrorists. I really don’t know what you call them now, but enough is enough.

Hill: You don’t know what to call them, but you appear to have some insight into how they think, which I find a little unsettling. Last thing and then I’ll let you go. You talk about the basket approach, as confusing as I find this story, FireEye/Mandiant Solutions is down 15%, is this one that you look at and say, this is worthy of consideration for a place in a cybersecurity basket? Or do you want to see some of the dust settle from this move?

Mann: The answer is absolutely. I think that this company has a place. This move did not come from nowhere. This is Kevin Mandia, who is a founder of Mandiant, which was actually sold to FireEye, and then he became the CEO. This is his bread and butter. This is the company that he first founded. This is what he knows best. FireEye is a credible competitor in the space. The artist formerly known as FireEye should absolutely be something that you would consider.

Hill: That would be a better name than Mandiant Solutions. Bill Mann, great talking to you, as always, thanks for being here.

Mann: Thanks, Chris.

Hill: As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against so don’t buy or sell stocks based solely on what you hear. That’s going to do it for this edition of MarketFoolery. This show is mixed by Dan Boyd. I’m Chris Hill, thanks for listening. We’ll see you on Monday.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Higher Meme Inventory: AMC Leisure or Tilray?

2021 could one day go down in investment history as the year of meme stocks. Several stocks have gone viral online in the past few months. Their popularity on the internet has resulted in huge profits.

AMC entertainment (NYSE: AMC) and Tilray (NASDAQ: TLRY) stand out as two very different meme stocks that have garnered a lot of attention this year. AMC was a short press Game a few months ago that roared back after a temporary lull. Its stocks are up more than 2,500% since the start of the year. Tilray enjoyed a big run up earlier this year as investors awaited the merger between the company and Aphria. The pot stock is still up nearly 190% after giving up some of its previous gains.

Which of these two meme stocks is a better choice for investors? This is how AMC and Tilray face each other.

Image source: Getty Images.

Financial condition

AMC had revenue of $ 148.3 million in the first quarter of 2021, down 84% year over year. This is not surprising when you consider that the COVID-19 pandemic had devastating consequences for the cinema operator. It’s also no surprise that AMC posted a large net loss of more than $ 567 million in the first quarter. Even before the pandemic, AMC was not consistently making profits.

However, AMC has maintained a strong liquidity position thanks to several equity and debt increases. As of March 31, the company’s cash on hand was just over $ 813 million, excluding $ 29 million of locked cash. Since then, AMC has strengthened its liquidity position through additional stock offerings.

Tilray’s exact financial position is a little more difficult to pin down because of the Aphria merger. Both Aphria and Tilray saw year-over-year revenue growth in their most recent quarterly updates. Both companies also achieved positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).

Aphria’s cash and cash equivalents as of February 28, 2021 were CAD 267.1 million. Tilray had a cash position of $ 261.3 million in all-stock transactions as of February 16, 2021.

rating

We cannot use earnings-based valuation metrics at AMC as it is not profitable at this point. However, the stock is currently trading at more than 20 times its last 12-month sales. Meanwhile, Tilray is trading a little over nine times after 12 month sales.

However, using a different metric gives AMC the advantage. Shares in the theater chain only trade at 0.18 times book value. Tilrays Price-to-book ratio is 6.7.

However, both valuation metrics have disadvantages. Historical sales used for trailing P / S multiples can be misleading. This is particularly the case with the COVID-19 pandemic, which affects both AMC and Tilray. The price-to-book ratio is also problematic due to the high level of goodwill that both companies have on their balance sheets.

Growth prospects

Arguably the most important factor in choosing between these two stocks is their growth prospects. However, this is also the most difficult area to assess.

There’s no question that AMC should bounce back in 2021 and beyond. The stock might even got a huge catalyst on the way when studios give up their efforts to debut films on streaming services in favor of showing new films in theaters.

Tilray could face significant challenges in the Canadian cannabis market this year due to price pressures. On the other hand, the lifting of pandemic restrictions could pave the way for stronger sales growth for the company’s cannabis products in Canada and Europe, as well as its hemp products in the United States

What do analysts think of the growth prospects for each of these companies? The advantage is clearly with Tilray. Analysts are forecasting average annual earnings growth of nearly 50% for Tilray, while anticipating deteriorating earnings for AMC after the next year.

Better meme stock?

In my opinion, AMC could still be the bigger winner in 2021. However, in the long run, I think Tilray’s chances are likely to be better.

In particular, I expect the U.S. cannabis market to open up to Canadian companies in the not too distant future. This will be a tremendous opportunity for Tilray.

The company already operates Manitoba Harvest, the largest producer of hemp foods with significant US sales. It also operates Sweetwater Brewing, a beer maker focused on cannabis lifestyle brands. Tilray believes these companies will provide him with a solid platform for the U.S. cannabis market.

While I nod my head to Tilray long-term, I think there are other stocks out there that offer better risk / reward ratios than Tilray or AMC. These stocks might not be internet memes, but they do have strong financial positions, attractive valuations, and great long-term growth prospects.

This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.