AMC Entertainment's Preferred Equity Conversion
The conversion of AMC Entertainment's preferred equity units to common stock has led to a decline in stock price. Analysts highlight concerns and discuss the impact on investor sentiments.
The highly anticipated conversion of AMC Entertainment Holdings' preferred equity units to common stock has caused the company's stock to decline. In a recent filing with the Securities and Exchange Commission, AMC Entertainment (ticker: AMC) announced that August 24th would mark the last day of trading for the AMC Preferred Equity units, also known as APES. Following this, APES will no longer be available for trading on August 25th, as they will be converted into common stock, resulting in a single class of AMC common shares.
The purpose of the APE units was to raise capital and address the company's debt. These units were introduced on the New York Stock Exchange in 2022. Additionally, AMC plans to implement a reverse 1-for-10 split of its common stock on Thursday.
As a consequence, AMC shares plummeted 24% on Monday, reaching $3.12, which marks their lowest closing since January 2021. According to Dow Jones Market Data, the stock has experienced a 23% decline so far this year.
To proceed with the conversion of the APE units to common stock, AMC needed approval from the Delaware Chancery Court, which has been successfully obtained.
Analyst Eric Wold from B. Riley Securities highlighted concerns among investors regarding possible dilution resulting from post-transaction equity offerings. However, despite these worries, AMC shares saw a 20% increase last week. This positive movement suggests that investors may be shifting their focus from potential near-term dilution to the opportunity for the company to utilize incremental equity in order to reduce debt and expand strategically through acquisitions.