The company will again use the proceeds to repay debt and improve its cash position. In a reverse stock split, the share count drops and the share price rises. A 1-for-10 reverse split like AMC’s should slash the share count to 10% and add a zero to the stock price. Two key initiatives in the restructure are a reverse stock split and conversion of preferred equity into common stock. Read on to learn the details of these moves and whether they can keep AMC out of bankruptcy going forward. For AMC Entertainment (AMC), the release of its new preferred stock class called APE units has come at a bad time.
That could potentially be enough to keep it afloat while competitors tease bankruptcy. “I would like to commend our shareholders for the wisdom exhibited in your votes by approving these proposals, and doing so by a wide margin. This is a landslide victory that shows your determination to keep AMC a strong and innovative company and the leader of our industry,” CEO Adam Aron said following the affirmative votes.
Competitor Regal Cinemas announced a potential bankruptcy, which caused hysteria in the movie theater industry. The nature of the preferred shares should lead them to trade similar to AMC common stock but the real mover for the moment appears to be how much it is discussed on Reddit. The special dividend acts similar to a 2-for-1 stock-split where instead of receiving two AMC shares for each share held, investors received one APE share and retained their previous AMC share.
The company has said these are necessary actions to avoid bankruptcy. The transaction doesn’t change the company’s value or the value of shareholder positions. AMC’s preferred equity dividend, aka APE, has been automatically distributed to existing shareholders. According to Public.com, “All [AMC] positions hirose financial uk review purchased before market close on Aug. 19 will be eligible to receive the [APE] dividend. [APE] dividends will be issued at close of trading on Friday, Aug. 19.” The conversion of APE units as approved could be delayed with a possible Delaware Chancery Court injunction hearing planned for April 27.
The reason it didn’t just issue more common shares is that the company would have to get approval from its shareholders, which shareholders already shot down. Instead, the firm found a workaround to sell billions of dollars worth of shares without needing shareholder approval in an effort to capitalize on the extreme hype AMC has received from meme investors. The more complicated aspect of the new APE units is how they actually function. The APE units were issued as a special dividend to holders of AMC common stock with each share of AMC receiving one APE. The APEs have the same voting power and right to a dividend as AMC common shares. On September 6, AMC announced its intention to sell 40 million more common shares.
- The company, needing shareholder approval for both initiatives, scheduled the shareholder vote for March 2023.
- Hordes of enthusiastic retail investors maybe rescued AMC from crushing debt.
- On the day of issuance AMC stock fell 42% but adjusting for the value of APE units issued left the shares down “just” 5.5% for the day.
- Currently the company has issued just over half of its approved preferred shares with the special dividend.
Because, as you’ll see below, AMC investors have more to process than a reverse split. With the lawsuit settled, AMC implemented the APE conversion on August 25, 2023. Consistent with AMC’s reverse split, each share of APE was converted into 0.1 shares of AMC. Going forward the APE units are not linked to AMC shares and can thus be bought and sold separately. Investors can choose to invest in AMC and/or APE shares and the two have already exhibited different trading patterns.
AMC raised billions during the pandemic by selling new stock but ran out of shares to sell. Investors, fearing dilution, rejected the company’s efforts to issue additional stock. AMC Entertainment appears to have found a creative solution to boost its share count and raise funds after investors balked at a proposal to issue more shares last year. That included $110 million from AMC’s creditor Antara Capital, LP. Antara also accepted 91 million APE units as payment for $100 million of AMC’s outstanding debt. Unfortunately for AMC, a tenfold rise in stock price hasn’t held.
The Short, Controversial Life Of APE
It began trading at $6.95 and eventually fell as low as $1.29. Importantly, APEs were also convertible to AMC shares on a 1-to-1 basis. If you want to invest in AMC, consider keeping your position conservative-at least until there’s more clarity on the long-term effect of the Hollywood strike and AMC’s growth strategy.
Now the exhibitor wants to converge the APE units and common shares to stop investors buying the lower-cost APE shares and shorting the higher-cost AMC common shares as part of an arbitrage trade. AMC is approved to issue up to 1 billion APE units with its board able to authorize up to 5 billion. Currently the company has issued just over half of its approved preferred shares with the special dividend. AMC can sell more in order to raise cash or pay down some of its $10 billion in debt and long-term liabilities. As would be expected, AMC issued the new APE units in an effort to raise more money.
Shareholders in AMC Entertainment Holdings have voted to allow the parent of AMC Theatres to convert AMC Preferred Equity Units, or so-called APEs, into the company’s common shares. “With the creation of APEs, AMC is deeply and fundamentally strengthening our company,” Aron said in a separate shareholder letter issued Thursday. Releasing the APEs not only references how some of these investors refer to themselves, but also allows the firm to bypass the need to increase the number of common shares. Aron wrote in a tweet the company’s new APE units will allow it to “raise capital, pay debt,” and more.
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AMC was trading in the $2 range before the split and went to about $16 just after the split. The stock price then dipped below $11 after the APE conversion. The creation of APEs laid the groundwork for AMC to access capital funding, without technically diluting its common shares. The company’s prior attempts to issue new common shares had not been well-received by investors. The APE conversion is AMC’s move to convert its preferred equity shares into AMC common stock. APE units rose 9 percent to $1.88 in trading on Tuesday, while AMC stock fell by 72 cents, or around 13 percent, to $4.74, as investors begin to anticipate a possible convergence.
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In what can be considered bad timing, AMC released its preferred stock class, called APE units, on Aug. 22. Some investors received APE units in the form of a dividend payout prior to the preferred class actually beginning to trade. Now, the class has officially begun trading, but it won’t be seeing immediate https://www.day-trading.info/the-basics-of-investing-in-foreign-government/ success due to the stock’s current volatility. Theoretically, the shares should converge and trade at roughly the same price as APE units are convertible into AMC stock on a one-to-one basis. Additionally, APE units are preferred equity meaning they would be paid out first in a potential AMC bankruptcy.
After offering the 517 million APE units, AMC will still have around 4.5 billion units remaining that it could sell to raise funds. “Today we are rewarding and recognizing our passionate and supportive shareholders, both to our shareholders in the U.S. and internationally,” CEO Adam Aron said in a statement. “Shareholders will receive one AMC Preferred Equity unit for each company issued share of AMC common stock that they own.” AMC Entertainment https://www.topforexnews.org/news/china-and-russia-dump-dollar-signaling-a-possible/ (AMC) has fully embraced its meme popularity with the release of a special dividend called “APE” units. The AMC Entertainment Holdings Preferred Equity Units (APE) were dividended at the end of last week to AMC shareholders and have already risen nearly 10% from their $6 opening price. For now, it looks like the movie theater company has delayed that outcome, thanks to some aggressive moves to stabilize its balance sheet.
This will put its liquidity in a tough spot and could spark a bankruptcy filing. As AMC stock plummets, are its APE units worth their weight? Here’s the rundown on a rival’s potential bankruptcy and how it could impact AMC in the long term. Credit Suisse, Roth Mkm, and Citigroup analysts are less positive. On September 1, Credit Suisse lowered its price target on AMC to $8 from $8.38.