IPOs

AMC Entertainment Wants Its Best Customers to Take Stock


AMC Entertainment is launching a new strategy to deepen its ties to those in its customer loyalty program: Make them company shareholders. The second-largest U.S. cinema chain plans to go public later this month and is offering the 2.5 million people in its Stubs affinity program the chance to buy shares—without fees.

Stubs members, who pay $12 annually for their membership, can purchase and sell $100 to $2,500 worth of AMC stock at an initial-public-offering website. They’ll be able to make their purchases at the stated IPO price a day ahead of the start of public trading, which presumably could provide them better prices if the stock spikes in its early days. The company also is letting its 18,000 employees acquire shares in the IPO, with the same “24-hour head start” as Stubs members, AMC Chief Executive Officer Gerry Lopez said in a letter filed this week with the Securities and Exchange Commission. Moviegoers in the Stubs program get a $10 credit for every $100 they spend at the chain, among other perks.

“While many companies depend on their customers’ support every day, those customers don’t always get the chance to own a piece of the action at the same price as Wall Street investors,” Lopez wrote. AMC plans to sell 18.4 million shares at $18 to $20 each, raising as much as $368 million.

“This is probably from the marketing department, with the thinking that [customers] will go to the movies more often if they have shares,” said Marcel Kahane, a corporate law professor at New York University School of Law, who called the move rare. “It’s kind of a cute idea. We’ll see if it catches on.” Kahane said the allotment for loyalty members may also be a bid to attract longer-term retail investors. AMC plans to pay a dividend on its stock, beginning in the first quarter of 2014.

It’s unclear whether AMC will offer its shareholders any perks or discounts at its theaters. A spokeswoman for AMC declined to comment.

The cinema chain is pitching its stock to the market as it portrays its business as being on the cutting edge of a transformation in how Americans go to the movies. AMC says its experiments with larger reclining seats, in-theater dining, and alcohol available at its multiplexes have all been successful. The company plans to spend $600 million over the next five years to expand the reclining seats to more theaters, and it says it will be able to charge higher ticket prices over time. AMC officials also see an opportunity to sell more food and drinks, since one-third of its 200 million yearly customers currently don’t buy these. “We believe the exhibition business is in the early stages of a transition. After decades of economic models driven by quantity (number of theaters, screens, and seats), it is the quality of the movie going experience that will define future success,” the company said in its registration filing.

AMC, based in suburban Kansas City, Kan., was acquired last year for $2.6 billion by the Dalian Wanda Group, the largest movie theater operator in China. AMC operates 4,950 movie screens and derives 40 percent of its revenue and 38 percent of its attendance from five markets: New York, Los Angeles, Chicago, Philadelphia, and Dallas. The company had revenue of $2 billion in the first nine months of this year, according to its SEC filing.

Bachman is an associate editor for Businessweek.com.

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