AMC shares sink after proposed stock split

AMC (AMC) fell 7% to close at $4.91 a share on Thursday after the country’s largest movie operator proposed a stock split and conversion of its APE (APE) preferred stock into AMC stock. The stock was halted for volatility at the start of Thursday’s session, as it fell as much as 17%.

The company said it wants shareholders to vote on a 1:10 reverse split of AMC stock. This type of move is often viewed by investors as cosmetic. A reverse reverse split reduces the pool of shares, in order to increase the price of each share. In the event of approval, every 10 shares held will be merged into one.

The board also proposes to convert APE preferred shares into AMC common stock. The APE jumped 78% shortly after market open on Thursday, hovering around $1.21 each.

APE debuted in August as a form of dividend for shareholders and as a tool for the company to raise funds. The name is a nod to the retail traders, referred to as “monkeys”.

At its launch, existing AMC shareholders were allocated one APE unit for each share 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 it has raised $162 million so far through the sale of its APE stock and has cut its debt obligations by about $180 million this year through a combination of refinancing and repurchasing some of its debt with a discount.

AMC CEO Adam Aron has leaned heavily into his shareholder base after his company became a staple of the “meme stock” frenzy. He regularly speaks directly with retail investors on Twitter.

On Thursday, Aron tweeted about the move to convert APE units to AMC stock addressing the price disparity between the two. The stock split is to avoid entering “penny stock” status.

If the conversion and 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 shares.

AMC Entertainment also announced Thursday that it is reducing its outstanding debt by $110 million through the sale of APE units to Antara Capital, a current holder of the company’s debt, at an average price of $0.66 per share. The closing price of the APE unit in the previous session was $0.685.

AMC Entertainment hasn’t seen its stock this low since January of 2021, before the height of the “meme” stock frenzy.

Ines is a senior corporate reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre

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