“The value of your AMC investment will be the combination of your AMC shares and your new APE units,” said CEO Adam Aron.
AMC Entertainment’s (AMC) new preferred dividend, which carries the ticker symbol APE, were halted just minutes after their debut on the New York Stock Exchange Monday.
The new shares, which AMC has called ‘preferred equity units’ that are “designed to have the same economic value and voting rights as a share of common stock”, opened at $6.95 each before being halted at $9.49 during subsequent trading.
If the APE units trade as designed, they and the stand-alone AMC shares should in theory act much like a ‘two-for-one’ stock spilt, as they give each common shareholder that same equity interest in the parent company. However, their conversion potential, which is subject to vote by AMC shareholders following a recommendation from the board, could dilute the outstanding value of AMC shares, adding to the downward pressure in early Monday trading.
“An investor should therefore expect that the price of a stand-alone share of common stock logically should at least initially decline, however that investor’s economic interest will be the sum of the price of a share of common stock plus the price of an APE,” AMC said in an explanatory statement when the preferred shares were first issued.
Scroll to Continue
AMC shares were marked 35% lower in early Monday trading to change hands at $11.71 each. APE shares were last at $9.24 each.
That would put the collective value of the shares at around $20.95 each, compared to the Friday closing price of $18.01 for the stand-alone AMC shares.
AMC shares were also pressured by both the fact that the stand-alone commons shares are effectively trading ex-dividend from the APE distribution, and the fact that the movie theatre chain’s largest rival, Cineworld, confirmed it’s considering a Chapter 11 bankruptcy filing in the United States.
U.K.-based Cineworld, which owns Regal cinemas in the U.S., hit a record low on Friday after the Wall Street Journal reported the Chapter 11 option, which the group said Monday is one of its options as it looks to reduce debts accumulated during the pandemic and its failed takeover of Canada-based Cineplex.
“Cineworld and Regal theaters globally are open for business as usual and continue to welcome guests and members,” the company said in a statement to the London Stock Exchange Monday. “The strategic options through which Cineworld may achieve its restructuring objectives include a possible voluntary Chapter 11 filing in the United States and associated ancillary proceedings in other jurisdictions as part of an orderly implementation process.”
“Cineworld is in discussions with many of its major stakeholders including its secured lenders and their legal and financial advisers,” the statement added. “Cineworld would expect to maintain its operations in the ordinary course until and following any filing and ultimately to continue its business over the longer term with no significant impact upon its employees.”