AMC (AMC) sank 7% to close at $4.91 per share on Thursday after the country’s biggest cinema operator proposed a reverse stock split and a conversion of its APE (APE) preferred equity units into AMC shares. The stock was halted for volatility early on during Thursday’s session as it sank as much as 17%.
The company said it wants shareholders to vote on a reverse split of AMC shares at a 1:10 ratio. This type of move is often seen by investors as cosmetic. A reverse split reduces the pool of stock, in order to increase the price of each share. If approved, every 10 shares held will be combined into one.
The board also proposes to convert APE preferred equity units into AMC common shares. On Thursday, APE shot up 78% shortly after the market opened, hovering around $1.21 each.
APE debuted in August as a form of dividend for stockholders, and a tool for the company to raise cash. The name is a nod to retail traders, referred to as “Apes.”
At the time of its launch, existing AMC shareholders were given one APE unit for every share they held. APE reached a high of $10.50 in August. Prior to Thursday’s announcement the units were trading above 60 cents each.
Earlier this week AMC announced that it has so far raised $162 million through the sale of its APE shares and has slashed its debt obligations by approximately $180 million this year through a combination of refinancing and repurchasing part of its debt at a discount.
AMC’s chief executive officer Adam Aron has leaned heavily into his shareholder base after his company became a staple of the ‘meme stock’ frenzy. He regularly speaks directly to retail investors on Twitter.
On Thursday, Aron tweeted the move to convert APE units into AMC shares addresses the price disparity between the two. The reverse stock split is to avoid entering “penny stock” status.
If the conversion and the reverse split are approved, AMC also wants the right to issue common equity, in the same way it has been able to raise capital through additional APE units.
On Thursday AMC Entertainment also announced it is reducing its outstanding debt by $110 million through the sale of APE units to Antara Capital, a current company debt holder, at an average price of $0.66 per share. The APE unit closing price in the previous session was $0.685.
AMC Entertainment hasn’t seen its shares this low since January of 2021, prior to the thick of the “meme” stock frenzy.
Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre
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Source: finance.yahoo.com