AMC Entertainment is no longer going APE, and its stock has taken a hit.
With a revised settlement approved in now-concluded shareholder litigation, CEO Adam Aron announced plans over the weekend to end the preferred-stock issuance program, part of an effort to shore up the theater chain’s capital base. Shares fell 34% to $3.44 in trading Monday following the announcement.
The APE, or AMC Preferred Equity, shares will stop trading on Aug. 25, according to an SEC filing Friday, resulting in a single class of AMC stock. The APE shares had been trading at a discount, in part due to the legal uncertainty over their creation.
“Converting APE units to AMC shares results in a single price for all AMC equity,” Adam wrote in a note he posted to X on Sunday. The company now plans a 1:10 reverse split, a move to bolster the company’s stock price.
“Bad actors can attack us after a split, but they can attack us right now too,” Aron wrote.
Aron also expressed hope that new capital will allow for further investment, innovation and the ability to pursue “attractive shareholder value creation opportunities.”
AMC, like other theater chains, had suffered losses due to forced theater closures during the COVID pandemic. It then struggled through nearly two years of comparatively light theatrical releases. Even as vaccines rolled out in early 2021, studios held back from releasing many of their biggest tentpoles or put them on streaming simultaneously with theatrical releases, a trend that’s begun to reverse this year.
The issuance of APE units was an attempt by Aron to take advantage of AMC’s status as a meme stock favored by day traders to raise capital for the company and stave off the prospect of bankruptcy.
“The dumbest thing we could ever do as a company is run out of cash,” declared Aron during last week’s earnings call.
Eliminating the uncertainty over the APE units should help AMC raise capital and keep the chain liquid as the theatrical industry inches toward box office levels approximating pre-COVID levels. AMC said July, thanks to “Barbie,” “Oppenheimer” and “Sound of Freedom,” had the most revenue for any single month in the company’s history.
