MarketWatch First Take: AMC CEO’s pay freeze a move to assuage frustrated investors, says Wedbush analyst

On Tuesday AMC AMC, -4.71% CEO Adam Aron said he has asked the company’s board to “red circle and freeze” his target cash and stock pay for 2023. Aron, who has led AMC since 2016, described his move in a series of tweets as AMC shares headed for their third consecutive decline after Aron announced another equity sale and plans for a reverse stock split.

See: AMC’s CEO asks board to freeze his pay, wants other top execs to forgo raises: ‘No increase for those at the top is the right thing to do’

“He has had to make a number of moves over the last year and a half, give or take, to assuage his investor base,” Reese told MarketWatch. “One of the issues when the stock started to fall … is that the executives, Adam Aron included, started to cash out.”

“Investors are frustrated,” she added.

Aron had sold more than $40 million in AMC shares since November 2021 but said he was done after a $7.1 million stock sale in January.

 See: What can we expect from meme stocks AMC, GameStop and Bed Bath & Beyond in 2023? 

AMC, like its fellow meme stock GameStop Corp. GME, -1.54%,  was a major beneficiary of the meme-stock frenzy in January 2021, which sent the struggling company’s shares skyrocketing to dizzying heights. But the company’s stock has fallen 77% this year, far outpacing the S&P 500 SPX, -1.20% index’s decline of 20.6%. AMC’s stock has plunged toward 22-month lows since the company announced a $110 million equity capital-raising plan last week and said it was seeking a 1-for-10 reverse split of its common stock.

The analyst says that AMC investors, who often refer to themselves as “apes” or “ape nation,” have typically fallen into one of three categories. The first group are retail investors who “wanted to stick it to the hedge funds,” according to Reese, the second are those that wanted to make a lot of money, and the third category are investors that essentially love AMC. The third group are, by and large, AMC’s remaining shareholders, she added. “Of course, many have been a little less enthusiastic of late,” Reese said.

AMC’s Preferred Equity units, or APEs APE, -24.08%, made their trading debut in August, heralding the latest chapter in a journey that took the cinema chain from beleaguered pandemic poster child to meme-stock phenomenon.

See: Is the golden age of the meme stock rally over?

The APEs have fallen 75.8% since their debut.

On Tuesday Aron explained that he had also asked AMC’s top 15 to 20 executives to forgo an increase to their cash salaries for 2023, and that they had agreed. 

Despite the top-level salary freezes, Aron confirmed that AMC’s employees will get a raise. “Yes, absolutely yes,” he tweeted, in response to a question posed on Twitter. “We are asking for financial sacrifice only from those at the very top.”

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In a note released earlier this month, Wedbush favored IMAX Corp. IMAX, -2.91% as the best way to play a theatrical rebound, the best positioned to benefit from the shift to Premium Large Format screens, an easy way to position for a rebound in China, and the best positioned to gain from theatrical alternative content.