HOW TO DEMOLISH SHAREHOLDERS: A FULL ANALYSIS OF BUSINESS PERFORMANCE - PART 2
Now lets take a closer look at the interest expense of the AMC corporate borrowings. So every AMC Astroturfer is celebrating the fact that CEO Adam Aron is paying off debt.
This is Part 2 of my series. Here you can find the other parts
We continue today’s episode of „Exposing #AMC Wallstreet shills“ & their three most common narratives from the seemingly unbreakable protectors of every action of CEO Adam Aron.
Now lets take a closer look at the interest expense of the #AMC corporate borrowings. So every #AMC Astroturfer is celebrating the fact that CEO Adam Aron is paying off debt. But does it really benefit the balance sheet by paying less in interest as a result (reducing cash burn)?
Wow, since Q1 2016 the quarterly interest expenses increased by 375,6%. In sum #AMC paid $2,235,831,000 in interest to its debtholders. Well done CEO Adam Aron, you have generated more than $2.2 billion in profits for your debtholders. I am missing the same Tweet for a big “Thank You CEO Adam Aron” from Citi Goldman & Credit Suisse – uuuhm UBS I mean. Credit Suisse is no more.
Lets analyze the interest expense a bit more. If we take a look at the “Change In Interest Expense: Corporate Borrowings Per Screen Operated” everybody with 2 functional eyes has to recognize, that since Q2 2017 began to rise & reached its peak of 445% in Q3 of 2020. Not surprising, because even while the theaters were closed during that period, the company still had to fullfill its debt obligations. But the numbers never came back to healthy levels & in Q3 2023 the interest paid per screen operated has doubled since 2016.
The orange graph shows the “Percentage of Interest Expense: Corporate Borrowings Added To Operating Costs & Expenses” – how much is the portion in comparison of overall Operating Costs to service the debt (even if its paid down). This proportion has also increased from 3.52% to 6.84% (7.08% on average over the whole timeframe). It means that despite #AMC paying down the debt the interest payments make a bigger portion of all Operating costs in the balance sheet. Who thinks that this is “bullish” or in anyway “positive” has no brain.
We can also see two huge spikes in the debt servicing costs – first in Q1 2020, when the Pandemic hit, second in Q1 2021 – more than 25% of overall Operating Costs & Expenses – that’s a quarter. Ok, in Q1 2021 the Operational Expenses were low -$576,100,000, the interest expense was huge -$151,500,000.
But to be fair to CEO Adam Aron, if “only” 6.84% of Operating Expenses have to be paid additionally for “just” servicing debt, that’s peanuts – right? Yeah sure, which is better for the company having lower debt servicing costs or bigger?
For a real-life comparison - A Family with 2 children, monthly expenses of $2,500 it makes the difference of MONTHLY INTEREST PAYMENTS (not paying down the debt!) of either $88 or $171. Now take that to a company level with billions in debt.
If we now analyze the evolution of corporate borrowings & interest expenses, we see a misery by its own making. In 2016, as CEO Adam Aron took over the management of #AMC, it had a substantial lower debt level as well as corresponding debt expenses. By Q3 of 2020 the debt increased by 214% to $5.8 billion at its peak. What is interesting is that from Q3 2020 to Q4 2020, the debt was paid-off by a good chunk ($846.000.000) & that was BEFORE the MEME STOCK CRAZE.
Why did CEO Adam Aron pay the debtholders big, if cash was urgently needed IN THE MIDDLE of the pandemic?
Remember that one? https://amcapepost.com/en/events/2020-12-11-AMC-talks-for-lifeline-from-Apollo
In the following quarter Q1 2021 debt was loaded up again by -$481.600.000. Why do you pay pay $846 million in debt including high interest if you take on 3 months later again half a billion $$$?
Interestingly that quarter #AMC had its highest ever interest payment by -$151.500.000. As of Q3 2021 after CEO Adam Aron Dilution proceeds on shareholders, #AMC had over $2 BILLION in CASH & could have reduced debt theoretically to around $3.5 - $3.7 Billion. Instead, the interest expense increased since Q2 2022 (APE ISSUANCE in Q3) by & CEO Adam Aron could pay down MEAGER -$751.400.000 of debt.
To give you another real-life example. Lets pretend you have $100,000 in debt & your quarterly interest expense is at 7% - which Is $7,000. In a year you pay $28,000. Fortunately, you receive $30,000 from the selling of the property of your rich parents. Would you pay down your debt by that amount, or would you just slowly pay down your debt & burning the money through interest expense? CEO Adam Aron burned it – or we should say – he transferred the money from shareholders he sold the stock – to debtholders – a PRETTY SUCCESFUL TRANSFER OF WEALTH.
Why did the debt level still increased from Q2 2021 to Q1 2022? #AMC had enough cash to pay for everything…is CEO Adam Aron addicted to debt from his buddies?
If we take into consideration the profits/losses #AMC made per customer (as per attendance numbers) an interesting detail unveils. The 2020 Q2 Number is an outlier at -$5.612, that’s why I ignored that point.
In 2016 #AMC made with every customer coming into the theater a pretty stable $0,55 – 55 CENTS – profit. This profit per customer was diminished as soon in Q2 2017 (after the theater acquisitions) & was reduced substantially to a LOSS of -$2.16 per customer, in Q4 it was at -$3. While it seems that #AMC had more quarters of profits pre pandemic, the average from Q1 2016 – Q4 2019 is negative $4.38. This means that #AMC would need more than $4.38 per customer during that timeframe, to be in profit zone. A lot of money that time.
During the pandemic the destructive open-up strategy can clearly be seen. The fix costs to operate all the screens, killed any chance of #AMC to make profits at all. A reasonable person could understand that if you operate a 1000 theaters & you can fill them only by 20% with customers, you are not able to raise prices by more than $35.97 per customer (for a 4 person family = $143.88) to be able to make any profits. That means, 2020 Q3 the operational & fixed costs were so high, that #AMC would need $139,29 PER customer to pay all the bills without cashburn. A ridiculously bad performance.
To make a real-life comparison – if you have 4 fridges at home & you freeze the goods for you & your neighbors, would you turn on all 4 fridges to pack them 25% full or would you just run 2 fridges & pack them 100% full to save energy bills for 2 fridges? Understand the point.
Sometimes its better to shrink to cut the extraordinarily high costs of operating a theater. No Theater can create profits if the attendance is too low.
#AMC became too fat for its customer base. That’s for sure. The fix costs are too high as well as the occupancy rate is too low.
At least there is light on the end of the tunnel & with Q2/Q3 2023 #AMC makes a 13-17 CENTS profit per customer – remember CENTS PER CUSTOMER!!!!!
Bu...bu…bu…buuuuuut CEO Adam Aron is a Harvard degree Alumni. He is competent. Why are all the figures SCREAMING that HIS MANAGEMENT is WORSE than TUBERLULOSIS?
Ok, to be fair, CEO Adam Aron must have done something right…what about Stockholders Equity? He cares about stockholders…right? He said that!
Wanna take a look?…here we go.
Well well well, the stockholders equity went from positive $1.546 BILLION in Q1 2016 to NEGATIVE -$2.138 BILLION in Q3 2023 – in 8 years. Wow, what a performance!
What can we see in the chart? CEO Adam Aron increased the debt for the Theater acquisitions by 125% at Q1 2017 on the other side the Stockholder equity just went up by 68%. What a good deal – for debtholders. In Q1 2017 Stockholders Equity reached its peak at $2.6 billion. After that point – THAT’S PRE-PANDEMIC – we can clearly see the gradual depletion of stockholders equity down below 2016 levels - BEFORE THE BIG SHOPPING SPREE BEGAN – down to $1.214 billion.
But how can this be?
#AMC became the biggest movie theater chain in the world. They doubled their screens from 5.380 in 2016 to 11.041 in 2019.
So what happened?
Professional management. Obviously.
Now lets compare the evolution of Stockholders Equity with the cash #AMC had on hand & how it changed.
What can we see?
Interesting. In the pre-pandemic phase #AMC had a relatively stable “low” (compared to today’s figures) cash position. It went from $107 million in Q1 2016 to $265 million in Q4 2019. During this timeframe #AMC NEVER EVER reached a cash position, followed the Jan 2021 events.
Astoundingly from Q4 2017 the cash position increased in the following next 4 quarters reaching $308 million in Q4 2020. (Un)Surprisingly the Stockholder Equity & Cash position charts started in Q4 2020 to mirror each others movement.
What could be the cause?
Well, #AMC Cash position is actually included in #AMC Stockholder Equity position & that means the movement & changes in #AMC Stockholder Equity position were caused by its cash position – not because the business performance or hard assets of the company changed so much. Its like taking the money from your parents, putting it in your bank account & then showing them how good you are with your own financials. Good job, good job I would say.
Well done Jimmy, Well done. backslabbing.
In the field of competence to improve stockholders equity – CEO Adam Aron failed miserably.
He couldn’t achieve it pre-pandemic & he has not seriously improved it during or before the recovery phase. It was just (stolen) from shareholders – his “rich” parents.
If we take out #AMC cash position out of the equation of the Stockholder Equity Position & compare it with the debt, then we see clearly how the cash “reduces” the visibility of the real destruction of stockholder equity. In Q2 of 2017 #AMC reached its stockholder equity (without cash) peak – that was the point as #AMC had completed the Carmike, Odeon & Nordic acquisitions at a premium & doubled its debt level.
After Q2 2017 the Stockholder Equity gradually went down & had lost more than HALF of its value. In 2018 Q3 #AMC had the lowest pre-pandemic Stockholder Equity value of $921 million while it reached its pre-pandemic peak. So if you take money to invest & your investment isn’t growing but only your debt, what does it tell you about your investment? Bullish? Absolutely not. And you can clearly see, that Stockholder Equity as well as Debt stayed relatively stable the following F** 5 quarters (=15 months!)** as the pandemic hit in 2020 & chaos began. #AMC & CEO Adam Aron professional management has only achieved the 2018 debt levels & NOT IMPROVED STOCKHOLDERS EQUITY.
What he has improved is his own wallet & the pockets of his buddies, but that I will show you later.
So why went the Stockholders Equity so significantly down after the pandemic? What is it, that #AMC could not recovery like Cinemark?
Its because of Stockholder DILUTION & I show you why….
First of all – to have everybody on the same page – you must understand the impacts of dilution.
Lets say there is a Company XYZ & they have 100 shares outstanding. You bought 60 shares of that company because you “like it”. That means, 40 shares are owned by others. 100 shares – 60 shares = 40 shares. Basic math. Easy. It also means you own 60% of the company. 60% is huge. You could decide everything for that company XYZ.
Ok, but lets also assume, the Board doesn’t like your ownership. They have authorized shares to issue & they can dilute you at will, how they dare to see fit “for the benefit of the company XYZ”, what they do – with another 100 shares. The amount of shares you own hasn’t changed, but your ownership of the company has halved from 60% to 30%. Now you cannot decide what the Board can or cannot do.
That’s only the effect on ownership – your portion of the cake – there are other effects like the EPS (earnings per share).
But lets take a look at how CEO Adam Aron has diluted his shareholders.
So in 2016 as CEO Adam Aron took over the steering of #AMC the company had meager 21.6 million shares outstanding - if you can spot the tiny surface. At the end of 2016 in Q4 he has already doubled the float to 55 million shares. CEO Adam Aron even bought back shares in 2017 & 2018. As you can clearly see in the chart, after that initial dilution - which he also used to buy up the theaters – it didn’t change significantly until Q3 of 2020. That’s the point where CEO Adam Aron excessively began to dilute his shareholders – ahem “rich parents” I mean.
In 2 quarters of 2020 he has already used 86% of the authorized share basket & catapulted it there from 10%. An 860% dilution factor. Interestingly this was before the apes came into play – before the Jan 21 “Sneeze”. The as everybody can see on the chart, the Reverse Split Conversion was a devastating corporate action & took the float up to 1.984 BILLION shares. Remember - CEO Adam Aron started with 21 million shares outstanding. 21 MILLION. That’s a dilution factor of 9177%.
To give another visual comparison – that’s what he has done:
But why has CEO Adam Aron already diluted 86% in Q3/Q4 2020 of all shares he could possibly issue before the “real craze” began?
Was it the preparation for the bankruptcy – getting as much money from shareholders as possible before filing – Dec. 11, 2020:
https://nypost.com/2020/12/11/apollo-circling-amc-as-chain-scrambles-to-stay-afloat-sources/
I think it’s no coincidence – but that’s just “speculation” from a “conspiracy theorist” he would say.
Lets go further with the analysis – how was the dilution in “practice” of APE?
APE was officially announced on August 4, 2022 (Q3) & launched on august 22, 2022 (Q3). Already in Q4 of 2022 CEO Adam Aron has diluted the shit out of it reached 93% of its available basket of 1 billion APE shares. But
“ALL THIS FUNDAMENTALLY AND DEEPLY STRENGHTENS #AMC”.
If you would be a (naked) short seller of #AMC, what is the ONLY thing you need from the company? BINGO - Cheap shares, to make a profit. You sell them dumb Apes shares at $72 all the way down to $5, you wait for the reverse spliut and conversion - and then you cover your ass with buying shares for mere pennies. You don’t necessarily need a bankruptcy of #AMC. But hey, CEO Adam Aron has plenty of shares & he is very busy to dilute his shareholders. Wasn’t he?
Lets see how “effective” his overall dilution was. I mean, I really get it. If #AMC needs urgently cash & you don’t want to raise your debt – well, then you gonna dilute.
But, don’t you want the absolute best price for your shares if you dilute?
The higher the price, the fewer shares you need to sell to reach a certain amount. Normally a company announces – we need $600 million in cash & that’s what we gonna dilute. But not CEO Adam Aron, he just dilutes first & then looks – well I gotta boatload of cash I can burn to run my house. Right? So lets see:
As you can clearly see with this graph, CEO Adam Aron had “only” two effective dilution proceeds. In Q4 2016, as he issued 33.4 million shares to raise $618 million & during the June Runup in 2021, as he sold 63 million shares & raised more than $1.2 BILLION in gross proceeds. The other share offerings were just ineffective. But APE was completely another level of destruction.
Bu…bu…buuuuut APE was a “special” dividend. It was “free” – right?
Well, lets take a look at the dividends CEO Adam Aron issued to shareholders – I mean, seriously, Dividends are positive for shareholders & none of those self-vested shares the executives gave themselves have received any dividend…right? Right?
As you can clearly see, #AMC issued since 2016 a relative stable dividend of 20-25 million per quarter (which is about $100 million per year!). In Q3 2018 CEO Adam Aron made a “special deal” with a Hedgefund Silverlake & issue a “special dividend” of $1.55 per share – he not only received himself but also Wanda & Silverlake.
I mean, cmon, taking a $600 million dollar loan & using $186 million of that new debt to pay a “special dividend” that’s a man who cares about the business, right?
The blue chart shows something very interesting.
Lets say you make $10,000 net earnings a quarter. Would you take 70% (=$7,000) of that profit to pay a dividend?
No?
Why not?
But CEO Adam Aron has rich parents. The blue line shows exactly this, to pay out the CASH dividend in his own, his buddies’ pocket & to shareholders, what portion of the quarterly net-earnings he used to do that. Obviously CEO Adam Aron didn’t care if the company generated quarterly profits, he paid the dividend, no matter what. In Q3 2018 #AMC had a -$100 million LOSS – but Iron CEO Adam Aron paid $186 million in dividends - with a LOAN!
Here Part 2 of my series ends. You can reach the other parts here
Part 1:
#AMC - HOW TO DEMOLISH SHAREHOLDERS - A FULL ANALYSIS OF BUSINESS PERFORMANCE - PART 1
Part 3:
Original Link:
https://www.reddit.com/r/amczone/comments/19aqmni/amc_how_to_demolish_shareholders_a_full_analysis/