AMC Stock Alert: Judge Approves APE Conversion

Source: rafapress /

AMC Entertainment (NYSE:AMC) finally won court approval to convert its AMC Preferred Equity (NYSE:APE) shares to common AMC stock.

The logical, expected result was that AMC stock tumbled and APE rose. AMC was due to open at $3.45 per share, a fall of 34% from where it was on Aug. 11. APE stock rose to $2.21, an increase of 24% over the weekend.

The moves reversed price action from July when a Delaware Chancery Court blocked the transaction. Back then, AMC shares rose in price while APE shares fell.

The Final Terms

The final terms, which include a reverse stock split of 1 for 10, are slightly changed from what shareholders initially approved. It is slightly more favorable to AMC shareholders who sued, with one extra share going to them for every 7.5 converted. Lawyers for those bringing the lawsuit also get 12% of the settlement value in the form of additional shares.

CEO Adam Aron created the APE shares to get around the company’s limit on shares outstanding as he fought off the Covid pandemic’s impact on movie theaters. His original plan was for a 1 for 1 conversion. 

The reverse split puts AMC back into compliance with those share limits and lets it sell more shares.

The end of the pandemic has seen some recovery in AMC’s results. Revenue for the June quarter was 18% ahead of a year ago, despite a fall in the number of screens available. The company even eked out a small profit under GAAP, $8.6 million or 1 cent per share. Even better results might come from the third quarter, thanks to the success of Barbie and Oppenheimer, although AMC remains smaller than before the pandemic and has nearly $5 billion in debt.

AMC Stock: What Happens Next?

Speculators on Stocktwits were not amused, but over time, the completion of this deal should reduce AMC volatility. Everything now depends on getting new movies into theaters, but writers and actors are still on strike.

This may well wind up being all for nothing.

As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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