AMC Raises $230.5M Through Private Placement To Hedge Fund Mudrick: What Investors Need To Know

AMC Entertainment Holdings, Inc. AMC shares more than doubled in the last week, and capitalizing on the appreciation, the theatre chain announced a private placement of its common stock. 

What Happened: AMC has issued 8.5 million shares of its common stock, valued at $230.5 million, to hedge fund Mudrick Capital Management, an 8-K filing by the company revealed Tuesday.

The per-share value of the offering works out to $27.12. This is at a premium to the $26.12 at which AMC shares closed on Friday. Over the week ended May 28, the stock ran up over 116%.

See also: How to Buy AMC Stock

AMC said it intends to use the net proceeds to pursue value-creating acquisitions of theater assets and leases, as well as enhancing the consumer appeal of its theaters.

The company is also planning to use the net proceeds for exploring deleveraging options.

The purchase agreement requires the shares to be "freely-tradeable."

Simultaneously, AMC filed a supplement to a prospectus filed on April 27 regarding the sale from time to time by the selling stockholder, identified as Mudrick, to sell up to 8.5 million shares of its Class A common stock.

Related Link: AMC Shares Pop On Upgrade: Why Analyst Sees Potential For Sharp Recovery

Why It's Important: After a dismal 2020 on account of the COVID-19 pandemic, AMC is slowly and steadily picking up the pieces. The company is considered a major beneficiary of economic reopening. 

AMC could capitalize on an anticipated rebound in domestic box office receipts, new studio agreements and its improving balance sheet, B Riley Securities analyst Eric Wold said in a recent note.

The additional cash infusion should come in handy to pursue growth vigorously when the box office returns to pre-COVID-19 levels.

"Given that AMC is raising hundreds of millions of dollars, this is an extremely positive result for our shareholders. It was achieved through the issuance of only 8.5 million shares, representing less than 1.7% of our issued share capital and only a small portion of our typical daily trading volume," AMC CEO and President Adam Aron said in a statement. 

AMC Price Action: In premarket trading Tuesday, AMC shares were rallying 17.53% to $30.70.

Related Link: Why This Analyst Says AMC Entertainment Stock Is 'Dramatically Overvalued'