Is Wanda quitting AMC too early? Wang Jianlin is an entrepreneur, not a gambler

As the saying goes: a big tree attracts the wind. In early June, Wanda and Wang Jianlin accidentally became a hot topic on the Internet again. The reason is that the stock price of AMC cinema chain in the United States has recently soared again, from about $12 at the end of May to more than $60 at the close of June 2. On May 23, Wanda just issued a notice to announce that it would clear its position and withdraw from AMC.

"Wanda fell before dawn and missed tens of billions of dollars in revenue" "Wang Jianlin passed by a hundred small targets"… For a time, Wanda and Wang Jianlin became the object of self-media ridicule, but these keyboard warriors and hindsight forgot a basic fact:

Wang Jianlin is an entrepreneur, not a gambler.

As the leader of a large private enterprise like Wanda, Wang Jianlin’s decision-making priority is the stable and sustainable development of the enterprise, avoiding unnecessary risks and earning profits from the good development of the enterprise, rather than taking huge risks like a gambler in an attempt to maximize profits in the stock market.

In 2012, the US movie theater industry was booming, and the US annual movie box office reached a record high of 10.80 billion US dollars. Wanda spent 700 million US dollars to acquire the loss-making AMC theater chain at this time, mainly based on the expectation of the good development prospects of the US movie theater industry.

"After Wanda Group acquired AMC, it promoted the successful listing and merger and acquisition of AMC, making AMC the world’s largest movie theater chain, and jointly promoted the cooperation of the film industry and the exchange of film culture between China and the United States."

Wanda’s statement in the May 23 notice clearly stated the purpose and achievements of the acquisition of AMC that year.

On December 18, 2013, AMC successfully landed on the New York Stock Exchange, raising 400 million US dollars, and the opening price on the first day of listing was 19.18 US dollars, which doubled the income of Wanda’s merger and acquisition in just over a year.

If you just want to make quick money in the capital markets, Wanda can choose the opportunity to exit, why wait until now?

In 2018, the annual movie box office in North America hit a record high of $11.80 billion, and then began to decline. Wanda began to gradually withdraw from AMC’s controlling stake in that year in anticipation of the downward turning point in the development of the US movie theater industry.

Wanda not only adopts a gradual withdrawal strategy for AMC, but also for other industries with bleak development prospects. In January 2019, Wang Jianlin explained his strategic adjustment in his speech at Wanda Group’s 2018 work summary:

"For other industries that do not have a competitive advantage now, and it will be difficult to achieve a competitive advantage in the future, we must gradually and orderly withdraw. In short, Wanda needs to be thin and have something to give. This is the logic of Wanda’s past, present and future disposal of some assets."

"Some self-media or so-called experts only see that we are selling, but they don’t see that we are still investing in new projects. Then again, if everyone in Wanda’s business can understand it, then we are worthless. This kind of strategic adjustment is definitely uncomfortable, even painful, but Wanda must’stick to Qingshan and not relax, and let the wind from east to west".

The outbreak of the COVID-19 pandemic has only accelerated the pace of Wanda’s exit from AMC. In January this year, American retail investors gathered to hype the first wave of AMC’s market, which sent AMC’s share price from as low as $1.91 to as high as $20.36, giving Wanda the opportunity to exit the profit.

Therefore, whether it is to acquire or withdraw from AMC, Wanda and Wang Jianlin are mainly based on the anticipation of the development prospects of the US movie theater industry, and later Wanda Group’s "domestic focus" development strategy needs.

Of course, the price of AMC’s share price should be considered, but how to ensure the stable and sustainable development of the enterprise and avoid unnecessary risks is the first consideration for entrepreneurs like Wang Jianlin.

No one can accurately predict the rise and fall of stocks. The future development prospects of the American cinema chain are not optimistic, but many industry insiders and entrepreneurs can anticipate it.

From the perspective of entrepreneurs, with AMC’s share price having risen sharply, Wanda has no problem exiting AMC and earning the money it is certain to earn.

Although AMC started the second wave of speculation this year after Wanda’s exit, and its share price continued to rise sharply, it has long been out of the hype of stock fundamentals, and the risk is extremely high. Moreover, there is no limit on the rise and fall of the US stock market. AMC’s share price can rise by 95% in a day, and it may also fall by so much. AMC’s share price once rose to $20 at the end of January this year, and quickly plummeted to $5 in February, which is evidence of this.

What’s more, the old investors know that it is difficult for the stocks of major shareholders to sell down their holdings by a large amount to rise sharply. If Wanda did not clear its position and exit AMC, AMC’s share price would not be more than 60 US dollars. Because in the process of Wanda’s large-scale selling of AMC shares, huge purchases are required, which will suppress the sharp rise in AMC’s share price.

Only after the announcement of Wanda’s clearance of AMC shares, without a lot of selling pressure, but with the expectation of a new main force entering, did AMC retail investors dare to go long without any worries, which led to the second wave of AMC share price speculation this year.

Those who mocked Wanda for "missing out on tens of billions of dollars in revenue" were either hindsight or ignorance.

According to media reports, Wall Street analysts recently reminded retail investors who are heavily invested in AMC stocks to be aware of the risks. Macquarie analyst Chad Beynon and his team believe that the debt situation of AMC theaters is worrying, and once again reiterated that AMC’s target price is $6, and the investment evaluation is "neutral".

The price of a movie ticket at an AMC theater is about $14, and the $6 target price means that in the eyes of this analyst, AMC’s share price is not worth half the price of a movie ticket at an AMC theater!

On June 5, Beijing time, Thomas Peterffy, founder and chairperson of Interactive Brokers (IBKR.US) in the United States, warned that investors in "retail group stocks" such as AMC cinema chain could face huge losses.

Wanda’s clearance and withdrawal from AMC is the need for strategic adjustment. Although it has not and cannot be sold at the highest point, it has earned double the profit while avoiding the huge risks it may face.

This is the vision and pattern of entrepreneurs, and gamblers and adventurers will never understand it.