AMC Entertainment Stock News: Amazon mulls acquiring theatre chain despite $4.6 billion net debt

AMC Entertainment (AMC) CEO Adam Aron may have one last trick up his sleeve. Rumors circulated on Tuesday that Amazon (AMZN) founder Jeff Bezos had come out of retirement to organize several executives to look into acquiring the struggling cinema chain. AMC stock surged as much as 15% on the news and closed up 13.2% at $5.15.

Fellow meme stock GameStop (GME) also spiked on the news but then closed up a more meagre 0.7%. In Wednesday's premarket, all three major US equity indices (the Dow, S&P 500 and NASDAQ 100) are seeing futures up between 0.7% and 0.8%. 

AMC stock news: Investment decks float between Amazon offices

The Intersect, an online publication covering the financial end of Hollywood, interviewed an anonymous executive at what appears to be Amazon's Los Angeles entertainment office. The exec told The Intersect's Joe Bel Bruno that internal conversations were brewing about buying AMC outright and that several pitch decks were being shared between the Los Angeles office and its headquarters in Seattle.

"Many customers interact with the AMC brand every week and physically go there," the executive said, and Amazon could then leverage that reach by marketing its grocery delivery or Amazon Prime offerings to theatre goers. “There could even be a subscription element to it as part of Prime. And it would help in booking Amazon movies,” the executive told The Intersect.

AMC said they would not respond to rumors and that no deal had been put on the table. In fact, it does not appear that Amazon has even reached out to Adam Aron or other executives. With AMC stock down 71% over the past year, Amazon may be considering buying the pieces out of bankruptcy. AMC has about $6 billion in debt and about $4.6 billion in net debt. Despite selling AMC Preferred Equity units (APE) last year to pay off debt, Aron readily admitted during the company fourth quarter earnings call that they are not out of the woods yet.

"Amazon would be better off buying a piece of Cineworld," Wedbush analyst Alicia Reese wrote in referrence to the bankrupt UK-based owner of Regal Cinemas – the second-largest theater chain in the US. When considering buying AMC, interested parties will quickly realize that AMC owes about twice the value of its market cap to creditors. Reese thinks the debt is the main reason to wait for bankruptcy before picking apart the carcass. Both Elliot Management and CVC Partners are both doing just that with the remains of Cineworld at present.

In the meantime, Adam Aron is busy preparing for a 10-to-1 stock split that merges APE units with AMC shares. Shareholders approved the deal in mid-March.

AMC stock forecast

The Amazon news sent AMC stock right up to the 50-day moving average on Tuesday at $5.49. AMC stock's premarket price advancing nearly 3% tells us there remains further eagerness in a deal's prospects. The 100-day moving average at $5.67 is the next challenge, followed by the $6.69 pivot point. From there the current R1 pivot lands at $8.98. For now support sits at the S1 at $4.84 and historical support from January at $3.80. Trying to predict the price action a month from now is a fool's errand as it mostly depends on Amazon's decision. 

AMC stock chart