AMC’s CEO, Adam Aron, announced that the Delaware Chancery Court has approved the company’s revised stock-conversion plan, describing it as a “significant milestone” in a letter to investors. Aron has continuously expressed concerns about AMC’s liquidity challenges. The plan involves converting AMC Preferred Equity (APE) units into common stock, as well as trading a single class of AMC common shares. A form 8-K will be filed with the SEC to provide further details on the company’s plans for the next two weeks.
Market Impact
Following the court’s ruling, AMC shares fell by 36%, while the APEs saw an increase of 11.8%. The previous attempt to convert APEs into common stock was blocked by Delaware Chancery Court Judge Morgan Zurn last month. This conversion is a crucial step for AMC in its ongoing battle to reduce its debt.
Benefits and Analysis
By proceeding with the stock-conversion plan, AMC aims to enhance its resilience and eliminate the capital-raising inefficiencies associated with APE units trading at a significant discount compared to AMC shares. Wedbush analyst Alicia Reese notes that resolving the court case removes a significant burden for the company. She expects AMC and APE shares to converge around $3 during the conversion process.
AMC continues to make strategic moves, such as its venture into premium gourmet candy, to strengthen its position in the market. This recent approval of the stock-conversion plan signifies a positive development for the company’s future prospects.
AMC’s Stock and its Settlement with Shareholders
AMC’s stock closed at $5.26 on Friday, while the APEs closed at $1.78. The recent settlement between AMC and its shareholders has also been a subject of analysis. The settlement, approved by the judge on Friday, will result in an increase in the number of shares outstanding for AMC. Currently, AMC has 519 million shares outstanding, which will rise to 588 million after the settlement is paid out. This translates to a 13% higher common share count.
Additionally, there will be a reverse stock split of 10 to 1, which means that there will be 59 million AMC common shares outstanding. Furthermore, the 995 million APE shares outstanding will convert to approximately 100 million AMC shares. Therefore, the end result will be 158 million AMC shares outstanding, with APE shares no longer trading.
In light of these developments, Wedbush has maintained its underperform rating and a $2 price target for AMC. Among eight analysts surveyed by FactSet, three have a hold rating and five have a sell rating for AMC.
Related: AMC’s Strong Performance and Quarterly Attendance
AMC’s recent stock rally is supported by the company swinging to profit and recording its highest quarterly attendance since 2019. This positive momentum has contributed to investor interest and optimism surrounding the company’s future prospects.
