What happened

Shares of AMC Entertainment (NYSE:AMC), the world’s largest movie theater chain, slipped 6.7% today. This morning, the company announced the sale of several theaters in the Baltics in order to help improve its liquidity.

Image source: AMC Entertainment.

So what

AMC said it would sell nine theaters in Latvia, Lithuania, and Estonia for $77 million, or a valuation of 9.3 times estimated 2020 earnings before interest, taxes, depreciation, and amortization (EBITDA) levels before COVID-19. The group of theaters makes up less than 1% of the company’s total base and could pave the way to more sales, as the company is likely to need more funding to stay afloat if the pandemic endures.

Though the company’s theaters have recently reopened in the U.S., at limited capacity, business will almost certainly be weak until the pandemic ends. Meanwhile, studios’ decisions to take new movies straight to homes, like Disney is doing with Mulan, could add to pressure on AMC and harken a new era in the industry, as studios like Universal have also expressed an interest in going direct-to-consumer.

In its update, CEO Adam Aron said, “We continue to be encouraged by attendance levels at theatres that have reopened in Europe, where essentially all theatres are open, and in the U.S., where almost 300 theatres are currently open for business.”

Now what

AMC began reopening theaters on August 20, but box office receipts are still down significantly, as only two movies in the U.S. grossed more than $1 million over the weekend: The New Mutants and Bill and Ted Face The Music. Bill and Ted grossed less than $1.1 million.

While theater execs have expressed optimism about reopenings, and there is likely some pent-up demand for going to the cinema, the road to recovery is still a long one for AMC and could easily involve more asset sales and debt raises, as the company’s financial position was in poor shape even before the pandemic.