Stock in AMC Entertainment has plunged after the exhibition giant said it raised $110 million in fresh capital and proposed a reverse stock split that could spell the end of the AMC Preferred Equity (APE) units.
Stock in AMC Entertainment fell by 60 cents, or just over 11 percent, to $4.70 soon after the start of the trading day.
The APE units — a name for the corporate tool adopted by meme stock investors — have worked as a new security to help AMC raise fresh capital, not least to help pay down a hefty debt load and fund acquisitions. On Thursday, AMC said it raised $110 million to pay down debt by selling preferred APE units to Antara Capital, LP at an average $0.60 per share, just down on the closing price of $0.68 on the New York Stock Exchange on Wednesday.
But besides the sale of APE units to Antara that reduces AMC’s debt load by around $100 million, the company’s board of directors is seeking the special meeting of shareholders of both AMC common shares and APE units to permit a conversion of APE units into AMC common shares. Adam Aron, CEO of AMC Entertainment, in a statement said the APEs had done their job to raise fresh cash and pay down debt.
“However, given the consistent trading discount that we are routinely seeing in the price of APE units compared to AMC common shares, we believe it is in the best interests of our shareholders for us to simplify our capital structure, thereby eliminating the discount that has been applied to the APE units in the market,” he added.
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