AMC Entertainment (AMC) - Get Free Report recently announced another initiative as part of its long-term growth plan. The company acquired part of gold and silver mining company Hycroft Mining Holding Corp. (HYMC) - Get Free Report.
The news resonated positively with investors. AMC's stock rose over 7% on March 15. And Hycroft's stock went up an incredible 100% at one point during premarket.
Let's take a closer look at AMC's recent acquisition and what it might mean for shareholders.
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Why AMC Bought Into a Gold Mine
AMC has purchased 22% of gold and silver miner Hycroft Mining for $27.9 million and will receive an additional 23.4 million warrants in Hycroft at $1.07 per share.
The mining company holds interests in the Hycroft mine, which covers approximately 71,000 acres in Nevada. It's considered one of the largest development sites in North America, with approximately 15 million ounces of gold resources and roughly 600 million ounces of silver resources, as mentioned in AMC's statement.
Along with AMC, billionaire Eric Sprott — one of the biggest investors in gold and silver — has also made a $27.9 million investment in Hycroft. That adds up to a total investment of $56 million that will help to strengthen Hycroft's finances. Today, the company has a cash balance of nearly $20 million and an elevated total debt balance of $158 million.
AMC CEO Adam Aron said that IT might seem strange for a movie theater chain to invest in a segment in which it has no expertise or correlation. But he thinks the skill and experience that AMC's management team acquired to overcome financial challenges during the pandemic will provide good assistance to the Hycroft Mining team.
Shareholders Helped AMC Switch to Offense
AMC is finally making its way back to pre-pandemic levels. The company's most recent quarter was the strongest it had reported in two years. Nearly 60 million moviegoers bought tickets from AMC. That's 64% of pre-pandemic levels. And food and beverage sales reached 87% of pre-pandemic levels.
But as CEO Adam Aron recently said, his company needs more than enthusiastic moviegoers to bring AMC back to its good old days.
To that end, the company is executing on a number of growth initiatives. The $1.8 billion equity boost raised by its shareholders has been crucial for AMC to switch to offense and look for growth, rather than just surviving.
Some of these initiatives consist of increasing IMAX and Dolby Cinema premium screens, starting NFT programs, and accepting crypto as payment. AMC is also trying to spur retail sales of popcorn, which — believe it or not — is a multibillion-dollar industry.
The investment in Hycroft Mining is another long-term move intended to increase profitability and provide value to both the AMC's shareholders and its financials.
CEO Adam Aron Is Doing the Right Thing
Many shareholders have criticized Aron for selling a portion of his AMC shares. However, AMC's “meme stock" hype led to an unexpected upswing at probably the most critical time in the company's history. If Adam Aron had not sold some of his shares, it would have been like winning the lottery and not cashing in.
Although many AMC investors have joined the game with the goal of defeating short sellers and uncovering illegal stock market practices, behind the ticker is a large movie theater company that needs to generate value.
And that is exactly what Aron and his team have been trying to do in a transparent way. They've displayed the courage to risk new initiatives to generate value for AMC and its shareholders and to have a sustainable business for the long term.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)