[Photo by Andreas Praefcke via Wikipedia Commons]

Since the complete closure of all movie theatres, bars, music venues and any other place where gatherings take place, the question of the economic impact on these businesses has been a hot topic and it looks like AMC‘s theatres could be headed for bankruptcy.

According to The Hollywood Reporter, analysts are projecting they could be headed for bankruptcy by the summer due to shutting down their theatres over the coronavirus.

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A couple of weeks back, AMC Theatres shut their doors after cutting their seating capacity by 50 percent just a few days prior.

Currently, there are bans on gatherings all across the world and the vast majority of people are spending time isolating at home.

In the THR report, they’re noting that MKM Partners analyst Eric Handler is downgrading his rating on AMC shares from “neutral” to “sell,” saying that “bankruptcy appears likely.”

Further, Loop Capital analyst Alan Gould also similarly downgraded. In Gould’s report, he notes “We think bankruptcy is a distinct possibility, and at a minimum, the company will require a highly-dilutive financing.”

In Handler’s report, he notes AMC’s lack of liquidity to survive through the summer with no revenue.

“Based on our view that theaters will be closed until at least August and our belief that AMC lacks the liquidity to stay afloat until that time, we expect the company will soon be faced with filing for bankruptcy. Further fueling our liquidity concerns is AMC’s decision to stop paying rents to landlords effective April.”

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On their part, AMC has been looking for ways to cut costs. Shortly after the closures, they laid off all of their 600 corporate employees. They also cut dividends paid out to shareholders by 85 percent.

Although AMC is aiming to request a government bailout, Handler notes the damage could be far too much to avoid Chapter 11 bankruptcy.

“We believe the company’s monthly cash burn rate in a no-revenue environment is running at $155 million per month, which likely keeps AMC liquid until June/July,” his report concludes.

For his 2020 outlook on where AMC is heading, its a stark difference from 2019.

He’s expecting a loss of $293 million, compared with a $771 million profit in 2019. Further, revenue is expecting to fall 44 percent to $3.05 billion assuming theatres are closing until August.

Do you think AMC could go bankrupt over movie theatre shutdowns due to the coronavirus? Let us know your thoughts in the comments below.

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