The domestic box office is about to go into a funk for two-and-half months due to the lack of tentpole product, but shares of AMC Entertainment keep on trucking.
Following Thursday’s news that the world’s No. 1 exhibitor was awarding APE investors with one AMC preferred Equity share for each AMC Class A common stock, AMC’s stock price jumped 31% on Friday from $16.97 to $22.18. Well, this morning they jumped again 14%, opening at $24.06 and hitting a high of $27.50. At the time of this post’s publication, AMC shares were trading at $25.02.
The preferred Equity stock will be issued to AMC common shareholders on the dividend date of Aug. 19, and be listed on the New York Stock Exchange under the symbol APE.
While the notion was that retail investors didn’t want to see any more stock dilution, the APE share maneuver by AMC will give the exhibitor more financial flexibility. The new preferred share is akin to having another stock and AMC will be able to do deals, and potentially pay down debt.
“While no one’s crystal ball can accurately predict stock market swings or volatility, the economic interest that our shareholders will have in both shares and
APEs will be in a company that we believe to be considerably stronger than AMC is now prior to this announcement being made this afternoon,” said AMC CEO Adam Aron during Thursday’s Q2 earnings call.
“With the creation of APEs, AMC is deeply and fundamentally strengthening our company. We already have shareholder approval in hand such that our board can decide we can issue more APEs in the future above and beyond those going out with this initial dividend. Given the flexibility that being able to issue more APEs will give us, we believe that we would handily be able to raise money if we so choose, which immensely lessens any survival risk as we continue to work our way through this pandemic to recovery and transformation, rather than having to worry about survival, the flexibility accruing to us from APEs can instead let us continue our efforts to try instead for AMC to thrive and to soar,” Aron added.
He added Thursday, “I act and think like a shareholder, because I too am a shareholder and a big one, in that. At the current AMC share price, I now own outright approximately $15 million of AMC stock and counting in also my previously granted, but unvested shares assuming they vest at so-called target vesting levels I have more than a $50 million economic stake in AMC. This is pretty obvious stuff, but that is a powerful incentive for me to do what is right for all of our shareholders.”
AMC’s Q2 sales were up thanks to a blockbuster summer fueled by Top Gun: Maverick to $1.16 billion vs. $444.7 million over the same quarter last year. The exhibitor’s net loss shrank from $344M Q2 2021 to $121.6M.