Shares of AMC’s preferred stock, or “APE”, rose 5% on Monday, while the company’s common shares fell 7.5%, after the company disclosed plans to sell up to 425 million additional APE.
At current prices, the movie theater chain could raise up to $1.6 billion from the sale of additional APEs, which was disclosed in a regulatory filing with Citigroup Global Markets acting as sales agent.
“The Company intends to use the net proceeds, if any, from the sale of AMC Preferred Equity Units APE,
primarily to repay, refinance, redeem, or repurchase the company’s existing debt (including expenses, accrued interest, and premium, if any) and otherwise for general corporate purposes,” the filing states.
issued the first EPAs in August in the form of a special dividend using the name created by the investors who turned the company into a stock meme, who often refer to themselves as “monkeys” or “monkey nation”. monkeys”.
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The APE special dividend effectively created a 2-for-1 stock split, with half listed under AMC and the other half under APE. The company has issued an APE for each of its approximately 517 million shares outstanding.
Like common stocks, APEs have been volatile since their stock market debut, a fact that even AMC acknowledged in the filing. In fact, it fluctuated between an intraday low of $3.35 on September 23 and an intraday high of $10.50 on August 22. It was listed at $3.75 at noon on Monday.
AMC, meanwhile, has fallen 55.7% year-to-date and 69% over the past 12 months. It has lost 19% of its value over the past five days and is down 22% over the past month. The S&P 500 SPX,
has lost 23% since the start of the year.
The stock has been on a wild ride over the past few years, going from a casualty of the pandemic when its theaters were shuttered around the world to a darling of the meme stock. While AMC remains a cause celebre for a vocal community of individual investors, the company’s financial health is concerning, according to data from RapidRatings, a company that rates the finances of public and private companies.
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The new EPA filing documents reflect this volatility.
“The market prices and trading volume of our Class A common stock and AMC preferred stock units have been and may continue to be subject to wide fluctuations in response to numerous factors, many of which are beyond the control of our control,” the prospectus said, adding that it could cause buyers “to incur substantial losses.”
If that’s not clear enough, he continues: “We believe that our market’s current volatility and prices reflect market and trading dynamics that are not necessarily related to our underlying business, nor to macroeconomic or industrial fundamentals, and we don’t know how long this momentum will last.” . In these circumstances, we would advise against investing in our AMC preferred stock units unless you are prepared to run the risk of losing all or a substantial part of your investment.
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Then there is the risk of dilution, or rather further dilution, as AMC’s stock experienced significant dilution each time the company issued new shares during the peak years of the pandemic.
And that’s not all.
“A “short squeeze” due to a sudden increase in demand for shares of our Class A common stock that greatly exceeds supply and/or targeted investor trading in anticipation of a possible short squeeze have led, may lead currently and could again lead to extreme volatility in the prices of our Class A common stock and the price of AMC Preferred Share Units may also be subject to similar dynamics and volatility.