AMC sells IPO shares at discounted prices amid its slow growth
According to a Bloomberg report, AMC Entertainment Holdings Inc is now offering its shares in the initial public offering at a discount from its preliminary pricing. The report said the cinema chain owned by China's third-richest man is struggling against its rivals with its slower growth and increasing debt.
The share sale will reportedly pick as much as $368.4 million today, with the shares being sold at around $18 to $20 per share, said Bloomberg. Based on the midpoint price and the IPO size, AMC will have an enterprise value 7.2 times bigger than MKM Partners LLC's forecast for next year earnings before interest, taxes, depreciation and amortization or EBITDA. Data compiled by Bloomberg showed that this is smaller than the 7.9 times 2014 EBITDA calculated for Regal Entertainment Group and Cinemark Holdings Inc
Wunderlich Securities Inc attributed the high rents of AMC's stores as the reason why the cinema chain's profit margins are below than its rivals. AMC is said to be focusing on large cities, of which property owners charge rent at higher prices as oppose to rural properties. Despite its recent draw to urban viewers due to its latest infrastructure updates, AMC is estimated to be failing behind in terms of revenue growth as compared to its rivals Regal and Cinemark. Moreover, New York-based research firm PrivCo Media LLC founder Sam Hamadeh said AMC is being anchored by its over $2 billion of debt.
Over the phone, he told Bloomberg, "AMC has lots of debt and the company's growth has slowed as well. AMC's IPO is unlikely to be well received."
The Leawood, Kansas-based AMC was acquired by China's Dalian Wanda Group for $2.6 billion, which is owned by Wang Jianlin. AMC is formerly owned by a consortium of private equity firms including Apollo Global Management LLC and Bain Capital. According to the Bloomberg Billionaires Index, Wang's wealth is worth $12 billion net.