AMC: The Zero Revenue Case

The onset of the Covid-19 pandemic put theatre company AMC’s already perilous financial situation under even further strain. The company’s high levels of debt resulted in a monthly cash-burn which left it facing an imminent Chapter-11 filing in the absence of significant capital raises. This case raises practical and ethical questions about the measures taken by management to stave off bankruptcy, including at-the-market equity issues and preferred share issues. Should a management team issue equity if market prices seem overvalued, as was the case when AMC was characterized as a meme stock? If common shareholders do not approve an increase in shares outstanding, can managers issue preferred shares if permitted by the corporate charter? Should insiders sell their own shares while issuing shares to the public?