Category: Leisure

Grab Your Popcorn, AMC ‘APE’ Conversion Gets Shareholder Vote

Posted on by phoffman@channelchek.com
Image Credit: CNBC (YouTube)

Will Adam Aron CEO of AMC Win the Long Awaited Battle?

Management of AMC Entertainment Holdings ($AMC) is holding the long-awaited special meeting at noon Eastern time, Tuesday, March 14. At this meeting, shareholders will vote the peculiar $APE shares that were paid out as a dividend to shareholders. The dividend shares that were announced with the message “Today we Pounce” from the CEO Adam Aron created quite a stir – they seemed to have been designed to root out fraudulent shares and challenge any naked shorts of the AMC common shares.

The shareholders’ opportunity is a decision of whether or not to increase the firm’s stock authorization and convert AMC Preferred Equity Units (ticker: APE) into AMC common shares ($AMC). It will also vote on a 10-for-1 reverse stock split that would only take place if the APE measure passes.

AMC management won an endorsement from the proxy firm Institutional Shareholder Services (ISS) for the reverse stock split and preferred stock conversion. Institutional Shareholder Services is a market intelligence and influence proxy voting firm, its endorsement increases the odds of management having their wish.

If approved, it would represent an important career win for AMC’s Aron, who has become a superhero of sorts to the meme stock investors that helped the firm through the pandemic. He has shown himself to be able to stay one step ahead of those that would profit if AMC stock falters. Some stockholders supporting the measure take this as a fight between weak and strong and good and evil where prevailing is the only option.

 In 2020 AMC Theatres lost $4.6 billion in sales due to Covid-related lockdowns and low attendance. Some powerful investors had shorted shares, many small investors grouped together and purchased the stock in droves, this created unexpected problems for the institutional short sellers that had large trades betting against AMC’s survival.

These investors caused the stock price to increase which allowed AMC to raise cash and survive and thrive.

The APE units, which represent one hundredth of a preferred share, have the same voting power of common shares.

Not all AMC shareholders are as supportive. Some are suing the company, arguing the APE sales decimated the voting power of common shareholders who might oppose increasing the firm’s share authorization.

Aron said during the fourth-quarter earnings call that if the vote falls short, the company could be forced to sell more APE shares at lower prices than a combined AMC share. On the same call he credited selling stock with helping the firm survive the lockdowns.

“We wouldn’t be blocked from raising capital, but we’d be raising capital on much less attractive terms,” Aron said. “It would cost more dilution to the stock that is entirely 100% preventable if a majority of our shareholders vote yes.”

The company has provided this link for livestreaming the March 14 meeting.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.sec.gov/Archives/edgar/data/1411579/000110465922092397/tm2223780d1_ex99-1.htm

https://variety.com/2021/film/news/amc-theatres-4-6-billion-loss-covid-1234927642/

https://investor.amctheatres.com/corporate-overview/default.aspx

https://www.barrons.com/articles/amc-ape-stock-price-shareholder-meeting-f412434d

The Fed Still Has a Long Way to Go To Reel in Wage Inflation

Posted on by phoffman@channelchek.com
Image Credit: Andrew Hudson (Flickr)

Employers Added 263,000 Jobs in November, How this Impacts Future Fed Decisions

There were many more jobs created and filled in the U.S. during November than expected. This may, on the surface, seem like a good thing for the economy, markets, and job seekers. But any expectation that the Fed is past the tipping point and is winning in the battle against conditions that increase prices will have to be curbed for a while.

The number of new hires points to unmet demand in filling positions, and the increase in wages directly adds to the cost of goods sold. Unmet high labor demand is inflationary and part of why the Fed is clear that it is not done.

Fed Chair Powell spoke last Wednesday in a lengthy address outlining the challenges that face the Fed and the avenues it is most likely to take. There is nothing in the strong November jobs report that alters what Powell has said. In fact, it may underscore the resiliency of the economy that the Fed is looking to temper. If you weren’t of the belief that the Fed would push Fed Funds beyond 5%, there is evidence that the Fed may need three 0.50% increases or more before it steps back.

Background

The Fed Chair and other Fed officials have reiterated in recent days that they are likely to lift rates and hold them at levels high enough to slow economic activity and hiring to bring inflation down from 40-year highs.

The just-released employment report for November was expected to come in far below the level reported. Digging even deeper into the numbers, it showed continued rampant hiring and elevated wage growth. The Fed had been hoping to keep a wage-price spiral at bay and get ahead of the supply-demand issues pushing wages and prices up.  

The November Unemployment Report

The headline number showed that employers added 263,000 jobs in November while the unemployment rate held steady at 3.7%. But the revised wage data in Friday’s release could concern Fed officials because it points to an acceleration in pay gains in recent months. For the three months that ended in November, average hourly earnings rose at a 5.8% annualized rate. This is a surprising increase from an initially reported 3.9% annualized rate for the three months that ended in October. Economists had expected the U.S. economy had gained 200,000 jobs last month.

At the same time, senior Fed officials have made sure it is no surprise if they lessen the size of rate increases in coming meetings. The next FOMC is the Dec. 13-14 meeting; the Fed is expected to move 0.50% rather than another 0.75%.

Most major stock market indices have traded lower, taking a bearish tone from the report and signs the Fed still is a little behind in its effort to squelch inflation-feeding activity.

Of interest to investors, the sectors with the most job gains were the leisure and hospitality and healthcare industries, both of which had been hard hit during the pandemic, and in government, where employment levels are still 2% below where they stood in February 2020.

Take Away

“To be clear, strong wage growth is a good thing,” Powell said this week. “But for wage growth to be sustainable, it needs to be consistent with 2% inflation.”

The accelerated pace of job growth in November, coupled with upwardly revised October statistics, makes clear to the markets the persistent challenge facing the Federal Reserve. The central bank has repeated that it needs to see some slack in the labor market in order for inflation to fall. This could come from reduced labor demand or increased labor supply, or both.

Choices Presented to Voters on Ballots are Presented to Investors as Opportunities

Posted on by phoffman@channelchek.com
Image Credit: Joe Shlabotnik (Flickr)

The Consequences of this Year’s Voting Should Create Opportunity for Investors

Once inconceivable in most voting districts throughout the U.S., ballots across the country this year will ask voters to decide on gambling measures, drug laws, and extra taxes based on defined demographics. While this is of interest to investors as it shows how trends are forming or continuing and can point to more potential for growth. Of the 130 ballot measures being decided upon on Tuesday, many will alter spending patterns and bolster industries.

What’s Being Decided Upon

Each year a number of states, including Maryland and Arkansas, are asking voters to decide upon legalizing recreational marijuana. Fully five states could move toward ending the use of involuntary prison labor. Nebraska and Nevada are asking voters if they should increase the minimum wage statewide. Gambling, firearms, and immigration are also the subject of state-level referendums.

A proposition in California would legalize online sports betting in that large potential market. Gaming companies, including DraftKings (DKNG) and FanDuel (DUEL) have poured nearly $160 million into the measure. It is not expected to pass, if it does, the news may cause a rally in these and other online gambling companies. Over $375 million has been spent by supporters and those against this measure.

Also being decided by California’s voters is a proposition that would raise taxes on personal incomes of $2 million or more. The revenue would be set aside to fund the state’s electric-vehicle production and help prevent wildfires. This is a very contentious measure that pit many from the same political party against each other.

In general environmental groups and companies perceived to benefit from a quicker evolving EV infrastructure support the “yes” campaign. Governor Newsom, and the California Teachers Association, a powerful state union, have joined business groups to oppose the measure, saying it would benefit a select number of large corporations as they transition to electric vehicles.

Recreational weed in Maryland? The pollsters seem to think it stands a good chance of passing. There are four other states (Arkansas, Missouri, North Dakota and South Dakota) where recreational cannabis is also on the ballot, those outcomes won’t be known until after the votes are counted.

To date, 19 states and the District of Columbia have legalized the adult recreational use of marijuana. Colorado could become the second state behind Oregon to legalize the personal use of psilocybin, the active ingredient in psychedelic mushrooms and other plant-based hallucinogens.

Massachusetts voters get to decide if they raise their income taxes by 4% if they have personal incomes of $1 million or more. This would leave the total rate for that bracket to 9%. Should this pass and bring in additional funds, they are earmarked for education and transportation.

Voters in five states will weigh whether to explicitly outlaw involuntary servitude as part of the punishment for a crime. Alabama, Louisiana, Oregon, Tennessee, and Vermont will all consider these questions on the topic; there is a growing movement to change the 13th Amendment so it no longer allows slavery as a form of criminal punishment. This could potentially benefit the industry in these states.

On immigration, Ohio voters are considering whether to ban all local governments from allowing noncitizens to vote. San Francisco and New York have passed laws allowing noncitizens to vote for local offices and ballot measures. These face legal challenges.

Elsewhere, ballot measures will ask voters whether to extend certain benefits to immigrants in the country illegally, including the ability to obtain a driver’s license in Massachusetts and pay in-state college tuition in Arizona.

Take Away

They say elections have consequences. As various states elect to adopt or deny changes in the running of their state, investors may be able to position themselves to benefit from trends, changes, and additional funds being made available.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.wlwt.com/article/election-results-2022-ohio-kentucky-indiana-senate-governor/41781051

https://www.wsj.com/articles/midterm-elections-2022-results-ballot-measures-referenda-11667864143

https://www.wcvb.com/article/voter-information-massachusetts-election-2022-midterm/41890411

https://www.cnbc.com/2022/11/04/draftkings-shares-tumble-after-monthly-users-fall-short-of-estimates.html

Is Leisure the Overlooked Market Sector?

Posted on by phoffman@channelchek.com
Image Credit: Asad Photo Maldives (Pexels)

Travelers Gonna Travel!– Travel & Leisure Sector May Ignore the Recession

Economic activity in the U.S. contracted during the first half of the year. At the same time, inflation is running at 40-year highs. Investors looking to keep their money productive with reduced risk have focused on consumer staples and companies providing necessary services where demand isn’t impacted much by price. This is what experienced investors do when the economy falters. But this economy seems a bit different than previous periods of shrinking economic activity and rising prices. Jobs are still plentiful, and one industry, with a lot of pent-up demand leftover from the pandemic, is gearing up to exceed all expectations. That sector is leisure. We take a look below at the potential strength in the industry, where opportunities may be found, and how you could reduce timing risk with stocks on your shopping list.

Current State

More than half of Americans see leisure travel as a budget priority right now; in fact, 62% of Americans took at least one overnight trip between mid-May and mid-August. This is according to the latest The State of the American Traveler report compiled by Destination Analysis. Consumers continue to prioritize experiences over alternatives in their budget. As the U.S. Moves out of Fall and into the colder months, it appears the trend will continue. Chuck Artillio is co-owner of SinglesSki.com, winter-oriented travel, and leisure company. He told Channelchek, “Last year at this time, business was robust, yet bookings, as we stand now for the coming season, are already up over 100%.” Artillio added, “I’ve never seen anything like this before.”

The Destination Analysis survey also expects industrywide strength in demand for travel and leisure services in the last quarter of the year. The results show Fall and early Winter trip expectations are high. Over a quarter of Americans expect to take a trip in either October (26.6%), November (24.8%) or December (28.4%). This is up from June when 20% said they expected to take a trip in the fourth quarter of 2022.

Source: US Global Investors

The survey indicates that typical holiday travel includes visiting friends & family as the top driver for late year. However, second on the list of purposes for travel is the desire to return to a destination, followed by general atmosphere, and food & cuisine.

Source: US Global Investors

The survey produced hard data that showed Americans continue to prioritize having fun and relaxation when traveling. This, of course, can mean different things to different people. The majority said being in a quiet/peaceful location (82.5%) followed by beach time (69.7%), chilling-out poolside (67.3%), enjoying culinary experiences (65.6%), and luxury hotel experiences (60.4%).

Do Expectations Provide Opportunities?

An industry research report published this week titled, Entertainment & Leisure Industry Report: Ideas For Your Investing Shopping List, contains some ideas for interested investors. The authors of the leisure industry report include Michael Kupinski, Director of Research at Noble Capital Markets. Overall, Kupinski and Noble’s research associates find the current state of the economy as one that provides a “discount rack” of stocks that can weather a further downturn and may be the first to rise as the recovery seems imminent. He provides information and careful analysis on some stocks that he believes have favorable attributes, go here for in-depth details of these companies.

The analysts suggest investors develop a shopping list and concede that recognizing a turning point in market direction is the “hard part.” But they have suggestions for that as well. These include nibbling at the targets on your list to scale in over a period of time. This averaging in to stocks on your shopping list will lower the risk of picking one day to pile in, which may turn out to be bad timing.

Take Away

Down markets bring opportunity. They always have, and there is no reason to believe this time will be different. Finding sectors with promise, as the travel and leisure sector is now showing, then diving into research to select those in the sector with the most promise, followed by a decision to average in to the market, is one recognized way to put yourself in a position to benefit from the current “discount rack” that many stocks now seem to be on.

Paul Hoffman

Managing Editor, Channelchek