AMC Entertainment's wild stock ride could end up being wildly lucrative for CEO Adam Aron.
As of June 2, when the theater chain's shares closed at $62.55, the value of his stock-based compensation had soared from roughly $8 million at the beginning of the year to nearly $260 million, regulatory filings and calculations by corporate leadership data firm Equilar show. That amount consists of $47 million in common shares and $212 million in other awards, including restricted stock.
AMC shares, which traded at more than $58 Monday, have surged more than 2,500% this year. The company lost $4.6 billion in 2020 and is on pace to lose more than $1 billion this year, analysts estimate.
Unlike top executives at some other companies embraced by individual, like retailer GameStop, Aron has welcomed the new shareholders that have piled into AMC with open arms. That's perhaps no surprise given that such investors now represent more than 80% of the company's stockholders, which is unusually high for a public company, experts told CBS MoneyWatch.
Aron's courtship of such shareholders and willingness to get behind a stock frenzy untethered from AMC's financial performance — the usual driver of value for companies — is a "bit of a gamble," said Douglas Chia, president of Soundboard Governance.
"He is benefiting the company here. He's also benefiting himself," Chia said. "Because, to the extent things stay above water through the end of October, he makes out well. So all the interests are aligned here — the company's interests, his interests and the shareholders' interests. H's just not doing it in terms of putting people in the seats of movie theaters, which presumably is what he's really paid to do."
Aron took over as chief executive at AMC in 2016. Last year, as the pandemic unfolded and the company's fortunes sank as theaters around the country closed down, AMC's board adjusted Aron'sto include more stock awards. They also lowered the price at which he gets stock via "restricted stock units," used by companies to offer top execs a reward for reaching performance milestones or targets.
As a result, Aron was awarded an additional 500,000 restricted shares in January, when the company's stock began to lift off after being championed on
guidelines set up by AMC's board to hold three times his base salary in stock, according to the company's filings. His salary for 2020 was just under $1.2 million. He was also awarded 1 million units that vested in October 2020.
CEO's $29 million gift to sons
Aron hasn't sold any stock this year, but he did give his two sons a combined 500,000 shares in March, according to Securities and Exchange Commission filings. As of Monday, those shares were worth a total of more than $28 million.
In all, Aron owns 758,747 common AMC shares and has 3.4 million shares in outstanding compensation including restricted stock, according to SEC filings and Equilar. Some of that comp includes shares is restricted from selling unless the company or its stock meets certain price targets over time.
The company didn't respond to an email request for comment on Aron's compensation.
Aron last week spent almost an hour talking with Trey Collins, host of the Trey's Trades channel on YouTube, to respond to questions about the recent , including $8.5 million to Mudrick Capital Management, as well as the company's plans for how it will use the recent influx of capital. AMC has sold more than $1.2 billion worth of its shares since April, capitalizing on the burst of enthusiasm for its stock.
AMC last month moved its annual meeting — where shareholders elect directors and vote on proposals — to July 29 from May 4 to give its new army of retail investors more time to review the company's plans. One proposal is to issue 20 million shares of stock to AMC's management essentially "for free," although that proposal has since been withdrawn, Aron told Collins.
AMC wants to issue 25 million new shares and is asking stockholders to approve the move, according to the company's proxy filing. That will allow the company to raise even more cash, which it could use pursue acquisitions and for other purposes. AMC said earlier this month it may use some of the for deals.
"If you arm us with the tool — meaning stock as the tool — to go find value-creating opportunities for AMC shareholders, we can do that," Aron said. "If we are not armed with this tool, then you're tying our hands behind our back and you'll make it just that much harder for us to land some of these attractive opportunities that could benefit us all."
During its run up in recent weeks, AMC appears to have been lifted partly by an assumption that as the U.S. economy begins to reopen, with the easing of the coronavirus pandemic, theaters will see a boost in movie ticket sales. Shares appear to have gotten a boost from the Centers for Disease Control and Prevention's recent guidance that vaccinated people no longer need to wear masks, including in indoor settings such as cinemas.
In accordance with the views of most Wall Street analysts and traditional shareholders, AMC acknowledges its skyrocketing share price has little to do with its current stock performance. The company warned shareholders of as much in a filing this week.
"We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last," AMC said in a filing Thursday. "Under the circumstances, we caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment."
for more features.