AMC Entertainment stock plummets on APE Securities’ NYSE debut

UPDATED CLOSING PRICES: AMC Entertainment’s new APE stocks (AMC Preferred Equity Units) began trading late in the morning in a messy session of the big show, with underlying shares down 41% at close. for $ 10.46. It rose slightly in the secondary market.

The APE units were distributed to AMC shareholders via their brokers starting this morning. Shareholders receive an APE for every common share they own. APES, which will have the same economic value and voting rights as common stock, opened at $ 6.95. Trading stopped briefly after they traded as low as $ 9.49, rallied to $ 10, but ended the session up more than 13% at $ 6.

AMC tried to prepare investors with an explanation, tweeted today by CEO Adam Aron. “An investor should expect the price of a single common stock to fall logically at least initially, although the investor’s economic interest will be the sum of the common stock price plus the price of the APE. AMC said.

ᲕᲜᲦᲚᲝᲕᲕᲜᲢ! Remember that APE has already made its first trade today on the New York Stock Exchange, the value of your AMC holdings now consists of the combined price of your AMC shares and your new APE units. Add the AMC episode plus the new APE unit instead of just the old AMC episode. pic.twitter.com/zfbo0yXCDp

– Adam Aron (@CEOAdam) August 22, 2022

Aron, when he announced APES earlier this month, described it as a kind of special dividend, a gift to AMC shareholders. (Monkeys is also jargon for amateur investors who piled up in AMC in 2021.)

Currently, the company is issuing 517 million APEs and the board has approved the issue of up to one billion shares. APES is good for the company because AMC now has a new currency that it can sell to 1) strengthen its balance sheet, including debt relief and other liabilities, and 2) invest in “upscaling and transformational M&A investment opportunities” . of value for shareholders. Aron hinted that it could include the theaters that Regal eventually abandoned.

The new values ​​provide flexibility that “greatly reduces any risk to survival as we continue to work for recovery and transformation through the impact of the COVID pandemic,” said AMC.

Recovery from the pandemic, or lack thereof, is in the foreground today, as the giant chain and parent Regal Cineworld have confirmed it can apply for Chapter 11 in the United States for restructuring. It dropped its first bombshell last week when it announced it was going to do something dramatic, due to unreasonably high debt and declining ticket sales as a glut of new releases gave way to a quiet late summer and early fall. for the curtains. Cineworld has about $ 9 billion in debt, much of which it acquired when it bought Regal in 2018 for $ 3.6 billion. (The British giant also planned to pay Canadian Cineplex about $ 1 billion for agreeing to buy the company, then changed its mind.)

The recently weak movie list is what all exhibitors face and what all CEOs have acknowledged on recent earnings statements. So AMC shares were a hit in Regal news, as did Cinemark, Marcus, and Imax shares. But analysts following the industry see Cineworld’s budget concerns as a company-specific problem.

“In our opinion, the balances of AMC, CNK and MCS.” [the other three] We are well positioned to overcome this weak board and see no reason investors are more concerned. Additionally, we see an interesting setup for exhibitors heading towards stronger films in 4Q22 and 2023 given the positive dynamics of participation and spend per client over the past 6-12 months, “said Eric Wold of B. Riley Securities in a note.

APE’s securities will give AMC access to a significant amount of additional capital, and he sees Regal’s problems as a potential boon to AMC.

“While we suspect Cineworld’s transition to bankruptcy will primarily focus on balance sheet restructuring, we don’t rule out the sale of some assets.” Since AMC already operates theaters in Europe, we think AMC could be an interested buyer. Looking at Regal’s US operations, we could see AMC circumvent market share restrictions by entering into leases, ”Wold said.

The volatility of the meme offering is something Aron just has to contend with. AMC became the meme manifesto in early 2021, when thoughtful and outspoken retail investors flocked to the stock to help push it higher and stifle short sellers who bet the stock would fall. This completely transformed the shareholder base from institutions to individuals. By shipping stock at a pivotal time during Covid, they allowed AMC to raise money by selling shares at inflated prices and helped keep it financially solvent. Since then, Aron’s extraordinary strategy has been work, humor and when he can involve this rogue group in the decision-making process.