AMC stock crashes when court approves APE conversion

Shares of AMC (AMC) were down in early trading Monday, down nearly 40% as investors feared further dilution of their common shares.

Over the weekend, a Delaware court approved a merger between AMC and AMC Preferred Stock (APE) that will make all of AMC’s outstanding shares from common stock. In addition, a reverse stock split is scheduled from 1 to 10 on August 24, According to an SEC filingwhich means that every 10 shares the investor owns will now become 1 share, but with a higher value.

APE shares will cease trading on August 25, per Fill.

AMC shares have been volatile over the past several months as this conversion was initially approved by shareholders in March and then stalled in late July. Adam Aron, CEO, AMC previously said Inventory conversion was critical to AMC having adequate cash balances in 2024 and 2025.

“AMC should now be able to raise additional capital,” Aaron wrote in a letter to investors Sunday. “We can use this access to equity capital to shore up our cash reserves, pay down debt, invest in growth initiatives to enhance our operating profitability and pursue transformative M&A opportunities.”

AMC stock has surged over the past month as a weekend opener for Barbenheimer, whose double mix of “Barbie” and “Oppenheimer,” resulted in AMC’s best one-day performance since before the pandemic. The company has been struggling to come back since 2020 when theater attendance dwindled due to restrictions related to COVID-19.

in the last quarter Reported on August 8thThe company’s quarterly revenue of $1.35 billion came in above analyst expectations of $1.29 billion. The company’s earnings of $0.00 also beat Street’s estimates of a loss of $0.04 per share.

This quarter marked the first time the company has not reported an adjusted loss per share since the last quarter of 2019. But while AMC’s revenue for the most recent quarter beat estimates, it still lagged behind revenue from the same quarter in 2019, before the pandemic, About $150 million. In the most recent quarter, AMC saw attendance decrease by nearly 30% from the same period in 2019.

“Resolving AMC’s case in court removes significant leverage, and we expect AMC and APE shares to converge around $3 convertible (APEs to AMC),” Wedbush analysts Alicia Reese and Michael Pachter wrote in a note Monday. “Despite our positive view on AMC’s recent fundamental performance, we maintain our Underperform rating and $2 price target as shares continue to trade at a massive premium over their peers.”