AMC Entertainment plunges 23% after it settles lawsuit to convert APE units into common stock
plunged as much as 23% on Tuesday after it entered a binding settlement term sheet surrounding a shareholder lawsuit about its plan to convert its APE preferred equity units into AMC common shares.AMC said that assuming the settlement receives court approval, it will pave the way for the movie theater chain to convert its APE units into AMC common stock, effect a 10-for-1 reverse stock split, and raise more capital by selling stock.to issue more stock to raise cash.
The movie theater chain needs to raise cash as it's not generated positive net income since the third quarter of 2018. And the box office isn't helping. The US box office has yet to reach its 2018 peak of nearly $12 billion in ticket sales. In 2022, the total box US office haul was just under $7.4 billion.
To circumvent the previous shareholder rejection, AMC CEO Adam Aron issued AMC Preferred Equity units, and it seems his plan is working.Because the APE units represent an equal claim of ownership to AMC Entertainment as the common stock does, there is an arbitrage play in which both securities should converge in price. Short-sellerWith AMC common stock trading at $3.
The big decline for the stock on Tuesday is the opposite of last week's move, as the theater chain soared more than 20%
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