Cinema operator AMC invests in Troubled Miner Hycroft | Investment News


By Mike Spector and Anirban Sen

(Reuters) – Cinema chain AMC Entertainment Holdings Inc said on Tuesday it had agreed to acquire a major stake in Hycroft Mining Holding Corp for $27.9 million, capitalizing on its popularity with retail investors to provide a lifeline financial to the troubled gold and silver mine. operator.

Hycroft, which owns a mine in northern Nevada, was on the verge of bankruptcy before AMC’s investment. Now he plans to raise up to $500 million by selling shares on the open market over time, Hycroft said Tuesday. Such a large capital increase is generally not accessible to a small business in financial difficulty.

Yet retail investors’ fascination with so-called meme stocks has made such deals possible. AMC CEO Adam Aron said on Tuesday that the company raised a “war chest” of $1.8 billion in 2021 from stock sales by retail investors.

Hycroft said on Tuesday it had also received “atypical interest from retail investors”, but warned investors that buying its shares could result in the loss of all or a substantial part of their money.

Hycroft shares ended up 9.35% at $1.52 after nearly doubling in value earlier in the day on news of the deal. AMC shares closed nearly 6.9% higher at $14.48

Aron said Hycroft looked like the movie theater chain a year ago, facing a cash crunch despite “rock-solid assets”.

Still, AMC’s investment “is a bit disconcerting” and its cash would be better spent paying off debt that topped $5 billion at the end of December, said Wedbush Securities analyst Alicia Reese.

AMC and longtime precious metals investor Eric Sprott will each invest $27.9 million and receive separate 22% stakes in Hycroft, the companies said. They will also receive an equal number of shares in the form of warrants exercisable at a price of $1.07 per share.

Mudrick Capital, a creditor of Hycroft whose Special Purpose Acquisition Company (SPAC) agreement with Hycroft in 2020 made him the company’s largest shareholder with a 40% stake, helped broker the deal with AMC, said a person familiar with the matter.

Jason Mudrick, the company’s founder and chief investment officer, called Aron last week to ask him to advise Hycroft on how it could launch a public offering to avoid bankruptcy, the person familiar with the matter said.

Hycroft, formerly known as Allied Nevada, had previously filed for bankruptcy and exited in 2015. More recently, its stock has surged after attracting interest from retail investors on social media platform Reddit.

Mudrick knew Aron because he had previously invested in AMC and participated in a 2020 debt restructuring deal that helped keep the theater operator afloat.

Aron responded that he wanted to invest in Hycroft to diversify AMC’s business, and that such a deal could help Hycroft attract more investors, the source said.

Mudrick chartered a plane Sunday to fly AMC executives and directors to Nevada for a whirlwind tour of Hycroft’s mining operations in the town of Winnemucca the next morning, the source said.

The deal was completed just before 4 p.m. EDT Monday, the source said. Before the negotiations, the company’s cash had fallen to around $8 million, the source added.

AMC had no immediate comment on Mudrick’s work on the deal, while Hycroft did not respond to a request for comment.

Sprott and other creditors have agreed to push back Hycroft’s debt repayments to 2027. Hycroft’s increased finances could allow it to develop an expensive factory to dig up gold and silver.

(Reporting by Mike Spector in New York and Anirban Sen in Bangalore; Additional reporting by Tiyashi Datta in Bangalore and Jessica DiNapoli in New York; Editing by Bernard Orr)

Copyright 2022 Thomson Reuters.


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