AMC Entertainment Holdings
The company will convert its preferred stock units into common stock during the opening bell on Friday morning, a move that traders had been anticipating all week.
(Stock ticker: AMC) AMC’s preferred units, or APEs, first floated last year on the New York Stock Exchange in an effort to raise money to pay down the company’s debt. This step came after the cinema chain lacked in 2021 sufficient votes to approve the sale of additional shares to increase capital.
Before the market opened on Thursday, AMC completed a 10-to-1 reverse stock split prior to Thursday to reduce the number of AMC shares outstanding, which will allow the company to issue more shares in the future. Because of the split, each APE unit owned by the trader will be converted into 1/10th of one share of AMC on Friday.
But the fun doesn’t stop there. AMC will issue common stock as payment to settle the litigation between AMC and certain shareholders. The company will make additional stock available to investors who hold common stock on August 24 to settle legal claims related to the APE conversion plan. AMC’s initial move to convert the APE units into common shares was put on hold because the settlement needed approval by the Delaware Chancery Court.
Once AMC completes the conversion and settlement process, it “will have permission to issue up to 550 million additional shares without additional shareholder approval,” Wedbush analyst Alicia Reese wrote in a research note Thursday. “AMC may use the opportunity to pay off some or all of its debt balance while AMC shares are still trading at a premium.”
Shares of AMC closed down 26.4% Thursday at $14.43 per share. Investors worry that their holdings in the company will dilute as AMC issues more shares for sale. Posted by CEO Adam Aron on X in the past week that merchants who believe dilution is wrongly “wrong”.
“Sometimes fundraising is an absolute necessity,” said Aaron. Over the past 12 months, for example, AMC has raised $418 million in cash through the sale of APE units. As of the end of the fourth quarter on June 30, AMC had $435 million in cash on hand. Can you imagine How precarious would our circumstances be if we had not had the foresight to raise this money?
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(tags for translation) Automotive