Comparing GameStop and AMC Theaters DISCLAIMER 1: None of this document is to be taken as financial advice. Your financial decisions are your own. DISCLAIMER 2 : Some of the data below may be slightly outdated, as it took a while to write this DD (Due Diligence) and a lot of things have own 5.19M shares in total or 6.18% of the total shares outstanding, more insider selling from AMCoccurred since (e.g. BlackRock purchased 473,900 more shares of GameStop to now , AMC restructuring debt, GameStop developments with the NFT marketplace, AMC hired new Vice President Ellen Copaken, etc.) Source 1 - https://www.sec.gov/Archives/edgar/data/1364742/000083423722004089/us36467w109 9_012822.txt Source 2 - http://openinsider.com/screener?s=amc&o=&pl=&ph=&ll=&lh=&fd=730&fdr=&td=0&tdr= &fdlyl=&fdlyh=&daysago=&xp=1&xs=1&vl=&vh=&ocl=&och=&sic1=-1&sicl=&sich=&grp= 0&nfl=&nfh=&nil=&nih=&nol=&noh=&v2l=&v2h=&oc2l=&oc2h=&sortcol=0&cnt=100&pag e=1 Source 3 - https://gamestop.gcs-web.com/static-files/713417ad-e18f-4f2c-bc1c-312f536d8b36 Source 4 - https://twitter.com/CEOAdam/status/1491445977131229191 Page 1 Good afternoon, This is broken up into several different categories as far as information. I. Preface (page 3) II. AMC Fundamentals (page 5) III. GME Fundamentals (page 25) IV. Fundamental Comparison (page 47) V. Squeeze Metrics (page 73) VI. Potential Cons (page 91) VII. Quick Pro Summary (page 91) VIII. Addressing AMC posts done by AMC posters (page 92) IX. Contributors (page 101) X. Afterword (page 101) Now, let’s go ahead and jump right into this so that we don’t waste too much of your time. It is recommended that you not be in an emotional state while reading this as it can be foreseen this turning into a shit flinging festival in the comments. So, if you’re emotionally invested in your stock right now, take however long you need to calm down so you’re able to look at this with a clear mind. Also, grab a beer or six beers and enjoy reading! This document is meant to be read in its entirety. Not cherry picked for information. Page 2 I. Preface Originally, it was not thought necessary to write a section like this however there seems to be misinformation circulating that needs to be addressed. What is Shorting? Shorting a stock is where you borrow a security that has been lent to you and sell the security in the hopes of buying it back later at a cheaper price. This borrowed security can be used in a multitude of fashions as a market maker. - Can sell it back and forth between companies which would create a wash sale down. - Can create a sell wall that would have to be bought completely for the price to go beyond it. - Can use it to mitigate your own risk and drive the price back down by heavily shorting. - There are other methods but you get the idea. However, the main concern is when you sell this stock to a person who is planning to hold it. Now, you have to go into the market and buy stock to meet the delivery of the one borrowed (If you are margin called or want to close your short position). In essence, when you short a stock, you are creating a share that should not exist or better put was not a part of the original total shares outstanding. What is Naked Shorting? Naked shorting is when you sell short while a borrow is not located. As a market maker, you can do this in the name and for the sake of liquidity. Naked shorting can also be done by selling a call that is then exercised away when you do not possess the shares. Source 1 - https://www.investopedia.com/terms/s/shortselling.asp Source 2- https://www.reddit.com/r/Superstonk/comments/rww52i/wall_street_vetera n_charles_gradante_calls_out/ Source 3 - https://www.sec.gov/investor/pubs/regsho.htm This document is meant to be read in its entirety. Not cherry picked for information. Page 3 Under D - “Naked” short selling is not necessarily a violation of the federal securities laws or the Commission’s rules. Indeed, in certain circumstances, “naked” short selling contributes to market liquidity. Source 4 - https://www.investopedia.com/articles/optioninvestor/09/naked-short-sellin g.asp Is it possible to have more than 100% ownership of a company without any foul play? The answer is yes. The way this also happens can be explained in this scenario below: ‘Company A’ has 1 million shares outstanding. ‘Institution B’ decides to buy ALL 1 million shares. ‘Institution C’ decides to borrow 200,000 shares from ‘Institution B’ to short the stock, however ‘Institution D’ ends up purchasing all these shorted stock. Now the amount of shares in circulation is 1,200,000 shares (20% more than the shares outstanding) and ‘Institution C’ must purchase back the 200,000 shares at a later date to CLOSE the short position. Furthermore, this can cause institutional ownership to be more than 100% in some cases, as both ‘Institution B’ and ‘Institution D’ own these shares in this example. (This doesn’t take away the fact many company's stocks are shorted in harmful ways that eventually drive the company to bankruptcy. The above example was to show that this can happen without foul play.) Source 5 - https://www.investopedia.com/ask/answers/07/institutional_holdings.asp#: ~:text=Sometimes%2C%20you%20may%20come%20across,of%20a%20 company's%20outstanding%20shares. This document is meant to be read in its entirety. Not cherry picked for information. Page 4 II. AMC Fundamentals 1. Partnership with Warner Brothers It could be said this is a great opportunity for AMC because they’re able to have exclusive rights to movies when they’re released. The unfortunate thing is that there are multiple studios which will require more partnerships and for streaming services to be okay with this. Something that it does bring up as a question is what the partnership entails. What is AMC giving to WB in order to have exclusive rights for the 45 days? We don’t know what this is and would assume a higher percentage cut of movie profits, but it is currently not known. So, we’d say this is a potentially great thing for AMC investors. Source - https://www.theverge.com/2021/8/10/22618697/amc-warner-brothers-thea ter-window-45-days-movies-streaming-battle-hbo-max This document is meant to be read in its entirety. Not cherry picked for information. Page 5 2. New Executives Vice President added Ellen Copaken VP of Growth Strategy Source - https://news.bloomberglaw.com/bankruptcy-law/amc-theatres-names-ellen -copaken-vp-of-growth-strategy Source 2 - https://twitter.com/CEOAdam/status/1491445977131229191 This document is meant to be read in its entirety. Not cherry picked for information. Page 6 3. We commend AMC for listening and creating an NFT to be delivered for a ticket and for share ownership. However, these things are the equivalent of Plastic McDonalds toys. Looking around online, if someone wanted to create an NFT to sell or distribute which looked similar to the one AMC made, it looks like the total time necessary would be ~15 minutes plus art time. So, this does not seem to be a task that is insurmountable by anyone. This also doesn’t seem like something you would need to hire specific people for like the entire NFT department GameStop has. Furthermore, the “I OWN AMC” NFT could have been claimed by anyone if they wanted it, which makes it almost worthless. Source - https://news.bitcoin.com/nft-craftiness-mint-a-non-fungible-token-art-collec tible-in-less-than-15-minutes/ This document is meant to be read in its entirety. Not cherry picked for information. Page 7 4. Popcorn GDP and what this would add to the company So, we will make this one short and sweet. The total gross domestic product of popcorn (the edible kind) in the world is estimated to be ~5.55B by 2025. So, let’s say that it is 5.55B right now. Now, this is if AMC is able to distribute worldwide and every other manufacturer of popcorn (the edible kind) goes out of business such as Orville etc. This is also under the assumption that AMC doesn’t have to purchase any additional infrastructure to distribute worldwide along with the different varieties of popcorn requiring different infrastructure as well. Just adding the 5.55 Billion to the stock equates to a total market share addition of $10.82 added per share. MATH: 5.55B divided by 513M. While this would be good for the stock, you may see why this would be a large task to try and handle. Now, let’s say that it’s actually double 5.55B this could be due to the added infrastructure required or the partnerships. We’re giving AMC the benefit of the doubt and doubling the GDP of popcorn and adding it straight to AMC without any negative parts to this fundamentally. The $10.82 turns into $21.64 added per share. Source 1 - Popcorn GDP source - https://www.wboc.com/story/43954333/global-popcorn Source 2 - Further research on Amplify if you’re inclined - https://www.cnbc.com/2015/08/05/amplify-a-popcorn-company-with-a-11-b illion-market-value.html Amplify is a snack food brand that started off with a $1.1B market valuation. This document is meant to be read in its entirety. Not cherry picked for information. Page 8 5. Now, we had mentioned prior how AMC would have issues trying to capture the world's GDP of Popcorn but let’s go into what all would be necessary for this: a. First, the cost basis for actual popcorn per bag is less than $2.00 including electricity for microwaving and the purchase price of the bag itself. (Roughly per bag) b. If they’re planning to do delivery of popcorn then it would require this amount per bag unless people are purchasing it as a luxury item. In which case it’s whatever at that point. We don’t know of the viability of this, but we do know that $2.00 would have to be beaten to have this popcorn as a consideration. This also doesn’t account for the 2 minutes and 30 seconds that would be required to make it by yourself vs however long for it to be delivered ready-made. c. If they plan to have bagged popcorn, then this would require an actual plant like with what Orville has as their current popcorn is produced via a kettle method in theaters and not bagged. d. Popcorn sold in grocery stores – This could be viable depending on price and I won’t discount it. However, a few places we know and have gone to offer popcorn for free without charging for the purchase just for store patronage. Again, this may be an expense because it will require: an individual manning the popcorn station, a distribution or piggybacking distribution on grocery stores, and stations that sell popcorn itself which includes but is not limited to the kettle, cash register, and employee wage. e. On top of all of what is mentioned, having the popcorn delivered directly to people would no longer get people into the theaters spending more for sweets, sodas, or the tickets. So, they’re just ordering the popcorn to stay inside and watch Netflix or other streaming services. This document is meant to be read in its entirety. Not cherry picked for information. Page 9 6. Moving into food distribution: We won’t discount this as it was mentioned to me in passing but we believe it holds weight. a. This would put more money into AMC’s pockets via utilization of DoorDash b. Not a large cost increase other than the additional reserves of food that would possibly need to be stored. c. The question is will people, other than AMC Investors, be purchasing food from AMC rather than ordering from Chilis, Applebees, LongHorn, Texas Roadhouse, IHop, Dennys, Chipotle, Olive Garden, Carabbas, Dairy Queen, Five guys, or any of the other chain eateries that offer delivery through applications and specialize in food? d. We won’t discount that this is a viable revenue stream without as much additional overhead, however, there are drawbacks such as the local competition and food storage. This document is meant to be read in its entirety. Not cherry picked for information. Page 10 7. The share offering was massively hampering any potential big squeeze. The shares outstanding are as follows: a. June 30, 2018 – 127.5M shares outstanding. b. Sept. 14, 2018 - 103.85M shares outstanding. c. Feb. 21 2020 – 104.24M shares outstanding. d. July 31, 2020 – 109.32M shares outstanding. e. Oct. 20, 2020 – 124.32M shares outstanding. f. Dec. 8, 2020 – 160.70M shares outstanding. g. Dec. 28, 2020 – 216.10M shares outstanding. h. Jan 22, 2021 – 339.07M shares outstanding. i. Feb. 1, 2021 – 377.87M shares outstanding. j. Mar. 3, 2021 – 450.16M shares outstanding. k. June 1, 2021 – 500.78M shares outstanding. l. June 30, 2021 – 513.33M shares outstanding. Source for shares outstanding - https://ycharts.com/companies/AMC/shares_outstanding This document is meant to be read in its entirety. Not cherry picked for information. Page 11 8. AMC currently has liquidity availability of more than $1.8 billion (including cash and undrawn revolver lines) Source 1 - https://s25.q4cdn.com/472643608/files/doc_financials/2021/q3/FINAL-3Q- Earnings-Press-Release-20211108-1430-v.F.pdf Source 2 - https://investor.amctheatres.com/financial-performance/quarterly-results/d efault.aspx# 9. AMC is in the process of acquiring more theaters to add to their already large amount of theaters. This has pros and cons a. Not a change or revamp of their old business model so still relying on existing revenue stream b. Creation of new locations to expand brand recognition. c. If another plague hits they’re back where they started as they haven’t revamped into something new. d. Becoming the largest movie chain could mean potential deals with movie producers which could benefit the shareholders through a price increase. This could be with movie studio partnerships or something else but being the largest theater chain does have some weight that can be swung around. This document is meant to be read in its entirety. Not cherry picked for information. Page 12 10. Current Debt of AMC is roughly around 5.45 Billion dollars. While this debt is currently deferred for roughly a year and a half this is still a large amount of cash due. Even at a rate of 3% per year that is $163,500,000 due every year and that would be an amazing interest rate if they managed to get it. Judging by Source 4 it looks as though their rough interest rate per year is roughly 7.72%. To figure this out I used: (Q1 153M+Q2 89.5M+Q3 89.9M+Q4 89M) (This is not a correct or proper number and if it is found to be wrong then the percentage will change) Divided by total debt of 5.45Billion x 100 to get the percentage = 7.72% roughly per year on the debt or a total expenditure of $420,740,000 dollars every year. Source 1 - https://ycharts.com/companies/AMC/total_long_term_debt Source 2 - Debt Deferment - https://twitter.com/CEOAdam/status/1473847871170650112 Source 3 - PDF Source for Debt Deferment - https://d18rn0p25nwr6d.cloudfront.net/CIK-0001411579/81980063-baf3-4 71e-8808-895f245c92a6.pdf This document is meant to be read in its entirety. Not cherry picked for information. Page 13 Source 4 - https://tradingeconomics.com/amc:us:interest-expense-on-debt Source 5 - https://www.fool.com/investing/2021/10/04/amc-pays-back-high-interest-d ebt/ Source 5 is not used as part of the report but is instead used to show that the debt is cumulative and is not a decreasing/increasing amount per year. 153M+89M for the first 6 months roughly. We will quote Source 5 directly as it’s fool and they don’t deserve the traffic. “It's safe for AMC to start paying back some loans On Sept. 30, AMC announced a repurchase of $35 million of its debt bearing a minimum 15% interest rate. The cost to repurchase the debt was $41.3 million, including principal and unpaid interest. As a result, AMC will save $5.25 million annually on interest expenses. That's undoubtedly good news for the battered movie theater chain, which has been devastated by the pandemic. "The repurchase of some of our highest cost debt is one of the many steps that we are taking to optimally position AMC for the future," said Adam Aron, AMC's chairman and CEO. Overall, management has skillfully navigated the coronavirus pandemic. The company was forced to shut its doors to moviegoers, which essentially brought its revenue to zero for several months. And because it was not feasible to reduce expenses to zero (you can't eliminate rent expense), the company was losing hundreds of millions of dollars each month. Raising cash became the most critical activity, and management did not disappoint. In the most recent quarter alone, the company raised $1.25 billion of new equity capital. As of June 30, AMC had $2 billion in liquidity on its balance sheet. And with nearly all of its movie theaters reopened and folks cautiously returning to watching films on the big screen, the worst-case scenario of running out of cash is all but eliminated for AMC. Therefore, it's safe for AMC to start using that money to pay back loans. This document is meant to be read in its entirety. Not cherry picked for information. Page 14 The next phase for AMC Paying back $35 million of its high-interest debt was a step in the right direction, but AMC still has a long way to go. As of June 30, the company had $5.5 billion on debt on its balance sheet. That debt has cost the company $239.6 million in interest expenses in the first six months of 2021. To put that figure into context, overall revenue during the same time was $593 million. AMC's interest expense as a portion of revenue is still a heavy burden on the company. Thankfully, AMC also has $1.8 billion of cash on its balance sheet. If it can continue using the cash to pay off more of its highest-interest debt, it will go a long way in returning the company to operating profitably. AMC is heading in the right direction in its recovery from the pandemic. Still, investors interested in buying the stock should wait until the company makes more progress in raising revenue and decreasing expenses.” To highlight a particular point of the above: That debt has cost the company $239.6 million in interest expenses in the first six months of 2021. To put that figure into context, overall revenue during the same time was $593 million. Source 5 - https://www.fool.com/investing/2021/10/04/amc-pays-back-high-interest-d ebt/ (Note: This is the most biased and easily the worst source used throughout the document. We just think there was some important information that shouldn’t be ignored simply because it was written by fool and the points brought up by the journalist were good for discussion.) 11. Adam Aron has been quite active with his shareholders which can be shown by answering questions over the shareholders call. This can be seen as a positive thing because the shareholders are being heard. He has made several appearances to answer the news as well as speak with shareholders. Now, on the negative side, Adam Aron has also been flying around from theater to theater to do showings of movies rather than trying to figure out how to deal with the 5.4B debt situation or coming up with a strategy to meet this need for loan repayment. If Aron is planning to retire, though, like he has shown by selling most of his vested shares, then he needs to have someone that he can pass the business along to to see AMC survive. This document is meant to be read in its entirety. Not cherry picked for information. Page 15 12. NFL and UFC at 4% of their theaters. Through research it is believed to be around 950 theaters total and roughly 38 have the capacity to do sports. Math could be slightly off but feel free to check the sources. While this may be a new business venture, it is not known how well this will work. The reasons have been listed below. a. Bringing the bar scene into a carpet floor and leather chair environment. Personal experiences lead this to be considered a bad idea. If you look at the interior of bars and where the UFC and Football games normally are there is a reason that furniture is near indestructible with the floor being made of tile or concrete. These surfaces are easy to clean in case of a mess. Now, we can hear you say, “well, I’m going for the experience that the theater will provide” ok cool we have more points below. b. Pitchers of beer are $10 over what they are normally at a bar. c. Non-easy clean surfaces would mean the cleaning crew is going to have to clean the floors well in case of an unexpected mess. d. This is a viable venture if you live close by one of the aforementioned theaters; however, some have to travel an hour to get to a theater that has the capacity to play a game where as there are 4-5 bars near some writing this along with restaurants that have blow-up screens that play the game/UFC fight as well. So, while this may not be a bad idea it is something that is unable to prop up the stock price. Source 1 - Total amount of AMC theaters - https://investor.amctheatres.com/resources/investor-faq/default.aspx#:~:te xt=back%20to%20top-,How%20many%20theatres%20does%20AMC%20 operate%3F,10%2C500%20screens%20across%20the%20globe. Source 2 - Theaters with football - https://www.amctheatres.com/sunday-football This document is meant to be read in its entirety. Not cherry picked for information. Page 16 13. Share ownership for AMC. This is the insider information according to the provided source however there are some that might not be considered as part of the board. So, since it appears as though ~959,843 shares (subject to change with more insider selling over time) are owned by the board, let’s look at what that chart looks like. Note - Wanda Group has sold their stake in AMC and no longer maintains 10% ownership in the company. They still maintain a limited amount of shares but it is not where it was prior. That sliver at the top is the amount the entire board of AMC owns in shares. To further expound upon this as a percentage: 959,863/513,330,000*100 = 0.18% Additionally, it can be found that insiders have sold shares on the dates shown in the above pie charts as well as before then which means shares were sold to the general public as late as 12/09/2021. Source 1 - https://www.secform4.com/insider-trading/1411579.htm This document is meant to be read in its entirety. Not cherry picked for information. Page 17 Now, this is a reply specifically to people that are saying that insider share ownership doesn’t matter and quoting DFV/KG/Roaring Kitty when saying this. If you recall there are also videos of DFV saying, “I looked at AMC. This is a terrible chart. It’s at support. They’re battling some shit right now. I don’t have any thoughts on AMC. They’re battling some risks with the pandemic. I don’t know how they’re going to fair but assuming we overcome this people will still want to see movies in theaters. Investment thesis is a lot more than (when investing) this product will be around in the future. No opinion.” Second video: “I looked at amc on the last tube. No strong opinion on AMC. Chart doesn’t look great. No strong opinion. I’m a fundamentals investor. This isn’t to say it’s bad or that it has no future. I just don’t care or have an opinion. Could be something happening but can’t tell in chart.” Source 2 - https://www.youtube.com/watch?v=Q50LPJ0TSoo Source 3- https://www.youtube.com/watch?v=6aiUJhLYohA The below shows that AMC has given out 8.6M to the executives because of their efforts during covid. Source 4 - https://deadline.com/2021/02/amc-entertainment-ceo-adam-aron-a-3-75-m illion-extra-bonus-for-extraordinary-effort-navigating-covid-1234702316/ 14. Accepting Crypto. Both companies are doing this through a third party. Source - https://www.marketwatch.com/story/amc-officially-begins-accepting-bitcoin -and-other-cryptocurrencies-says-ceo-on-twitter-11636715493#:~:text=Aft er%20much%20fanfare%2C%20the%20chief,Ethereum%2C%20Bitcoin% 20Cash%2C%20Litecoin. This document is meant to be read in its entirety. Not cherry picked for information. Page 18 15. AMC NFTs. AMC have released two NFT drops so far. This was the “I own AMC” NFT as a gesture to the shareholders and the Sony partnership that included 100+ Spider-Man NFT’s. Although these were both thoughtful ideas, they were given out for free and so AMC received no revenue as a result of the NFT sales. They could further explore this idea in the future and consider charging $ for unique and rare NFT’s for movies as new movies enter the theaters. Source 1- https://twitter.com/CEOAdam/status/1481692645806252034 Source 2- https://twitter.com/ceoadam/status/1465018558514143232?lang=en This document is meant to be read in its entirety. Not cherry picked for information. Page 19 16. CEO Adam Aron announced AMC will now sell vegan nuggets at the movie theaters. The main point about this is the fact he stated “we’ve been working for years to be able to make this announcement.” Although, it takes a long time to create a food product to be released into stores nation-wide, it is alarming that they spent years working on a product that may prove to bring in low amounts of revenue per year. Management should consider working on other streams of revenues that can help turn the company around and thrive. Source - https://twitter.com/ceoadam/status/1479318224541995010 This document is meant to be read in its entirety. Not cherry picked for information.