Before the Bell: Rivian's Blues; AMC Looks Ahead to March 14 Shareholder Vote

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Premarket action on Wednesday had the three major U.S. indexes trading higher. The Dow Jones industrials were up 0.23%, the S&P 500 up 0.34% and the Nasdaq 0.51% higher.

Eight of 11 market sectors closed lower on Tuesday. Utilities (−1.72%) and energy (−1.44) gave up the most. Materials (0.45%) and communications services (0.24%) posted the biggest gains. The Dow closed down 0.71%, the S&P 500 down 0.30% and the Nasdaq down 0.1%.

Two-year Treasuries closed up three basis points at 4.81% on Tuesday, and 10-year notes remained unchanged to close at 3.92%. In Wednesday’s premarket, two-year notes were trading at around 4.86%, and 10-year notes traded at 3.95%.

Oil traded up by 1.8% Tuesday, but it traded down by about 1% early Wednesday morning at $76.30.

Tuesday’s trading volume was above the five-day average. New York Stock Exchange losers outpaced winners by 1,568 to 1,454, while Nasdaq advancers led decliners by about 65 issues.

The weekly report on U.S. commercial petroleum inventories is due out after markets open Wednesday morning. According to the American Petroleum Industry survey reported on Tuesday, crude oil inventories rose by 6.2 million barrels last week. U.S. inventories rose by 7.65 million barrels in the week ending February 17.

Among S&P 500 stocks, Dentsply Sirona Inc. (NASDAQ: XRAY) added 10.19% after posting better-than-expected earnings and revenue Tuesday morning. The country’s major supplier of dental products also confirmed in-line guidance.

Norwegian Cruise Line Holdings Ltd. (NASDAQ: NCLH) dropped by 10.18%, following a miss on profit expectations and downside guidance on first-quarter and full-year earnings. The company’s revenue for 2022 was still down by a third compared to the pre-pandemic year of 2019. But profitability depends on cutting costs, especially on marketing and advertising, to boost demand from consumers.

Electric vehicle maker Rivian Automotive Inc. (NASDAQ: RIVN) reported quarterly results after markets closed Tuesday. The company posted a smaller-than-expected loss, but revenue missed consensus estimates by a mile. No big surprises there. Rivian continues to plan to build 50,000 vehicles this year despite shutting down production lines in the fourth quarter to retool for new technologies it plans to include with vehicles built in 2024. Wall Street had been hoping for a higher number.

The company also announced a recall (its second) of nearly 90% of all the cars it has built so far to repair a faulty seat sensor. While no injuries or crashes resulted from the defect, this is not a good look for Rivian.

As for good news, Rivian has a cash balance of $12.1 billion after burning through $1.9 billion in the fourth quarter. A company can make a lot of mistakes with that kind of cushion. Until shareholders decide somewhere down the line that they would rather get something back for their investment. Amazon is the largest shareholder in Rivian with about 17.3% of the outstanding common stock.

AMC Entertainment Holdings Inc. (NYSE: AMC) also reported quarterly results after markets closed Tuesday. The company did not lose as much as analysts had expected, even though revenue came in well below the consensus estimate and was down 15% year over year.

AMC’s stock traded down more than 6% on Tuesday and was down more than 8% in Wednesday’s premarket session. How much of that downturn is due to quarterly results and how much to a pending shareholder vote is arguable. A Delaware court has set a hearing for April 27 to hear a challenge from common stockholders who object to AMC’s plan to boost the number of shares available to holders of preferred shares (NYSE: APE) so AMC can issue more common stock.

A shareholders’ meeting set for March 14 will be allowed to go ahead and a vote will be taken on the company’s plan to raise its number of authorized shares from 524 million to 550 million and a proposal for a reverse 10-for-1 stock split that would allow the automatic conversion of APE units into AMC common stock. The results of that vote will not be implemented until after the April court hearing.

In the press release announcing the results, Chairperson and CEO Adam Aron said:

As we have been saying for a long time, the industry-wide box office will not return to pre-pandemic norms before 2024 or 2025 at the earliest. Therefore, this active management of our capital structure is vital for AMC to ultimately both survive the pandemic and to thrive over the long haul. Accordingly, we continue to urge our shareholders to ‘vote yes,’ voting FOR the recommended proposals at the March 14 special meeting of shareholders, which gives AMC the best chance to generate value for all of our shareholders in the months and years to come.

Aron is AMC’s largest shareholder, with some 8.2 million shares of AMC common stock and APE units.

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