While neither company is currently acknowledging the speculation, AMC's stock is tearing higher today as traders on Wall Street consider that Amazon may still be interested in buying the beleaguered theatrical exhibitor.

The Daily Mail reported the story, although acknowledged in their own report that the e-commerce giant's interest in the chain may have already soured.The report made clear, though, that the world's largest exhibitor had been in talks with Amazon about a potential takeover as its business was ravaged in the wake of the pandemic.

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Despite a rebound in its share price, even before this speculation of a potential Amazon takeover, AMC remains financially troubled and on the brink of bankruptcy. With its shares and debt both trading at steep discounts to pre-pandemic levels, Amazon (or any other buyer) could certainly grab the company cheap. AMC's market cap has been bouncing of late around $400 million, as their theaters closed around the world as the virus spread. AMC was bought by Chinese Dalian Wanda group in 2012 for $2.6 billion, but later bought back $600 million of its own shares in 2018 when Beijing limited ownership in foreign companies by Chinese entities. Silver Lake, a $40 billion private equity firm, financed the 2018 share repurchase and took a seat on AMC's board. To avoid drifting into bankruptcy this summer, AMC recently raised a very costly (in terms of interest and security) $500 million debt round to provide liquidity through the fall.

Bezos, on Amazon's recent earnings call said that, while his company generated an additional $4 billion in its most recent quarter, thanks to the pandemic, investors should "take a seat" while the company ramps up spending. Bezos indicated that spending would be to ensure the safety and well-being of the company's hundreds of thousands of employees, although he may have simply been foreshadowing that the company would take advantage of the crisis to snap up companies he has been eyeing as they are weakened in the wake of the economic devastation created by the virus.

Amazon was the first streamer to win an Oscar when it won in 2017 for Manchester by the Sea, starring Casey Affleck and Michelle Williams. To participate in the Oscar race, Amazon (and other streamers) were required to get their titles on big screens, if only for limited runs. The Academy of Motion Picture Arts and Sciences changed their rules due to the pandemic, however, which previously required that films up for Oscar consideration must have been shown in a Los Angeles cinema for at least a week. Since cinemas have been closed, however, The Academy will allow movies for consideration that have not met that requirement, opening the field for titles that have never made it to the big screen. While this rule is expected to end once the pandemic subsides and theaters can reopen, it is unclear what that might mean for the upcoming awards season, as Hollywood has pushed release dates for almost all of their most anticipated titles and suspended production -- leaving far less Oscar fare in the pipeline this season, but also likely affecting at least one more Oscar season as well.

Amazon has had previous interest in buying a theatrical exhibitor, most recently exploring a deal for Landmark, which instead was sold to a private buyer, Cohen Media Group, owned by billionaire Charles S. Cohen.

Theatrical exhibition is a far different business, though, than groceries - the industry the e-commerce giant entered in 2017 by purchasing Whole Foods Market. Owning a theatrical exhibitor would give Amazon much greater control in the movie industry, especially with the dominance that would come with owning the industry's largest chain. Much could change if Amazon made such a move. For instance, day-and-date cinema and digital openings may become the norm. If Amazon owned AMC, they would be much less sensitive to the issue than other exhibitors, including AMC, themselves, and might even support such a release policy which would reshape the entire industry. Adam Aaron, the AMC CEO, recently started a war of words with Universal over this screening policy and boycotted all Universal titles as a result. Amazon would be far more likely to support such a policy and could drag the entire industry, kicking and screaming, into this new reality.

Amazon is not the only streamer that has had their eye on theatrical exhibition. Netflix was also in the running to buy Landmark and may even be interested in AMC. With its e-commerce and cloud businesses both firing on all cylinders, Amazon certainly has the resources (in either cash or stock - or any combination thereof) to make a theatrical purchase, Netflix could also certainly find the capital to get a deal done. Such speculation may also find Apple mentioned among the possibilities, although it would be a real stretch to see Tim Cook and company reach out for such folly. It would seem far more likely that if Apple were to deploy its fortress balance sheet to make a real-world acquisition, it would be for another recently weakened company like Disney and not for a one-trick pony like AMC.

Besides AMC, Cinemark has also seen its stock badly damaged in the wake of the pandemic and could be a much better takeover target for Amazon and Netflix. The company has less reach, but still a great footprint in the U.S. and beyond and would pose less global challenge to acquire and integrate than AMC.

While this acquisition speculation is likely not to result in a deal, the fact that the entire theatrical exhibition industry has been decimated over the last 2 months and the damage is likely to continue well into 2021, and possibly beyond, is clear to all - movie fans, investors and mere bystanders. If there were a time for massive tech companies to descend on the industry and deploy their vision and capital to disrupt the long standing business models, this once in a generation economic displacement would be that time. This news comes from Variety.

Justin Case