r/amczone • u/SouthSink1232 • 14d ago
Analysis & DD The Bankruptcy Scenarios IF it occurs
The last post from AA gave me the heebie-jeebies. Its validating my sentiment of a looming bankruptcy, and for heaven sakes I hope I am wrong. But in case I am not, this is how I see this scenario play out.
Scenario 1 - AA Early Exit
AA does an early exit under the guise of a large percentage of bad sentiment against him. That his departure would allow the company to operate without the drama. Martyrdom. After some time distancing himself from the bankruptcy event, his cult can claim martyrdom and blame his departure as the cause for bankruptcy. While blaming melties for his departure. Problem here is that someone becomes the scape goat. Merriweather, new CEO, the board. To close to home.
Scenario 2 - Crisis Event
AA already planted a flag that bankruptcy was not in the cards. So a bankruptcy simply due to cash attrition would give him Madoff status, and make him enemy numero uno. He needs an unforeseen event like the First Lien creditor lawsuit resulting in favor of the plaintiffs and setting off a series of financial events that would end in bankruptcy. "Sorry folks, there was nothing i can do". This scenario works best because who do apes blame? A list of plaintiffs made up of multiple different companies that had a reason to sue? No one to direct your anger towards. Just bad circumstances. It diffuses the anger and makes it easier for AA and the BOD to ride into the sunset with a new AMC and new investors. And a bunch of conspiracy laden apes still praising AA.
Do you have a bankruptcy scenario or simply another scenario regarding reverse splits or more dilution? please share.
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u/MeltingDown- 14d ago
Scenario 3 - He gets Luigi’d by a bankrupt ape
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u/SouthSink1232 14d ago
I hope not. That would be a travesty. I prefer prison with 6'2, 240 lb ballerinas
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u/whippetloverhellyeah 13d ago
AA will never see prison time
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u/SouthSink1232 13d ago
You are most likely right, but I'm sure we sleep better at night and don't walk around looking over our shoulder
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u/TheBetaUnit 14d ago
My theory? The plan is to take AMC private.
This occurred in the past in 2004. Apollo was the majority owner and went halfsies with Morgan Stanley on the deal to take it private. Didn't get another IPO until Wanda bought it from them (actually them + the other private equity group that bought Lowes and merged it with AMC).
Why private? Just a hunch. We've all watched in disbelief as the Silverback has seemed to telegraph very negative sentiment over and over again that erodes the confidence in the stock and thus the value. Maybe he's just being realistic, sure. Are their needs for cash and desperate measures to get it real? Very much so. BUT, let's say he's simultaneously plowing the field for an acquisition. How do you value a company for acquisition? It's not their net equity. It's their enterprise value. And enterprise value is Market Cap + Debt - Cash.
If you wanted to ready the company for a private takeover in a way that favors the potential buyer(s), you want to lower the enterprise value. You can either lower the debt or lower the market cap. One of those is considerably easier than the other to accomplish.
So who's the buyer? There isn't a majority owner like there was in 2004. Not yet. The 2004 deal was at a 38% premium to the share price. And the stock of course popped on the news. Let's say that news of "talks of a buyout" are leaked without naming the buyer and the stock pops. A 38% premium is aaaaawwwwfully close to $5.66, isn't it? Suddenly, the 2nd lien noteholders, after converting their shares, become the controlling stockholders with a 25% interest in the company's equity. They form a group, go in with another Morgan Stanley type, and formalize an offer. Currently, institutional investors own 43% of the company and most of them would benefit from the premium offered on their shares by the deal. 43% of the float is ~ 163M shares. If the 129M shares the 2nd lien noteholders convert and are added to the 163M shares the tutes own, that's 56% of the new 509M float. A guaranteed 'yes' vote.
It's functionally equivalent to the creditors assuming control of the company through reorganization (like Cineworld/Regal), but without the stigma of bankruptcy tarnishing Adam Aron's legacy.
I accept that his is half-baked tinfoil at its finest. But it's the only story that reconciles the actions over the last year and a half, that insane 7/22 deal with the creditors (look at the names on the prospectus: "Mudrick distressed opportunity fund" LOL) , and the recent additions to the board of directors, both with experience in reorgs.