Struggling companies take inspiration from AMC’s handbook in search of stock market lifelines
The frantic stock buying activity that may have saved AMC Entertainment Holdings Inc. from bankruptcy also opens a potential way out for other troubled borrowers.
More and more companies facing significant financial challenges are looking for a lifeline in the stock markets, eager to capitalize on the rising interest in buying stocks by non-professional investors. Earlier this month, coal miner Peabody Energy Corp., offshore drilling contractor Transocean Ltd. and retailer Express Inc., have all announced plans to sell shares, betting the stock markets will support them despite heavy leverage, recent losses and headwinds in the industry.
Selling stocks is not the usual way for struggling companies to grab a lifeline. More often than not, they are forced to seek bailout loans, divest assets or pursue a merger, which can be difficult due to their existing debt.
But equity markets are now more open to support struggling issuers, in large part due to risk-hungry and eager to speculate individual investors, according to Bankers and Trend-Following Investors.
The planned equity sales, if successful, mark another way that non-professional investors have reshaped financial markets since they began demonstrating their collective power last year, creating opportunities for financial executives.