Movie-theater chain is also planning a reverse 1-for-10 split of its common stock
Shares of AMC Entertainment Holdings Inc. fell 22.3% Monday ahead of the company’s planned stock conversion.
The shares fell on trading volume of 93.2 million shares, well above their 65-day average of 29.09 million shares. Some 26.7% of AMC’s AMC, -23.72% float is shorted. The stock is also on track to snap a four-day winning streak and is on pace for its largest daily percentage decline since Aug. 14, when it fell 35.6%.
The conversion of AMC Preferred Equity units APE, -6.61% will result in the trading of a single AMC common share class and is part of the movie-theater chain and meme-stock darling’s ongoing battle to eliminate debt. AMC is also planning a reverse 1-for-10 split of its common stock and an increase in its authorized common shares.
In a Form 8-K filed with the SEC last week, AMC explained that the reverse stock split is expected to occur on Aug. 24, which is also the record date set for a litigation-settlement payment as of close of business that day. Conversion of APEs into AMC common stock is expected to occur on Aug. 25, with the APEs ceasing trading that day and subsequently being delisted from the New York Stock Exchange.
Contingent upon the reverse stock split and conversion, AMC will make a settlement payment consisting of one share of Class A common stock for every 7.5 shares of Class A common stock owned by settlement-payment recipients as of Aug. 24, the company said in its filing. Following the reverse stock split, based on 51,919,239 shares of Class A common stock expected to be held by the settlement recipients, an aggregate of 6,922,566 shares of Class A common stock will be issued in the settlement, according to AMC.
The APE units fell 3.7% Monday. The APE name is a nod to the investors who turned the company into a meme stock, who often refer to themselves as “apes” or “ape nation.”
By proceeding with its stock-conversion plan, AMC will be more resilient and will also eliminate the capital-raising inefficiencies of APE units trading at a significant discount to AMC shares, AMC CEO Adam Aron said in a letter last week.
The resolution of AMC’s court case removes “a significant overhang” for the company, Wedbush analyst Alicia Reese wrote in a note released last week. “We expect AMC and APE shares to converge around $3 into the conversion (APEs into AMC),” she said.