AMC stock drops 7.5% as company plans to sell another APE
Shares of AMC preferred equity units or APEs went up 5% on Monday, while the company s common stock fell 7.5% after the company unveiled plans to sell another up to 425 million APEs.
The cinema chain could raise up to $1.6 billion due to 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 net proceeds, if any, from the sale of AMC Preferred Equity Units APE, to repay, refinance, redeem or repurchase the company s existing indebtedness, including expenses, accrued interest and premium, for general corporate purposes, according to the filing.
AMC AMC issued the first APEs in August as a special dividend based on the name created by the investors who turned the company into a meme stock, which often refers to themselves as a ape or ape nation. See Now: How one investor applied the lessons of the meme stocks frenzy to blockchain and NFTs.
In effect, the APE special dividend created a 2 for 1 stock split with half listed under AMC and half under APE. The company issued an APE for each of its roughly 517 million shares outstanding.
AMC acknowledged in the filing that the APEs have been volatile since their trading debut. It has fluctuated between an intraday low of $3.35 on Sept. 23 and an intraday high of $10.50 on August 22. In midday trading Monday, it was quoted at $3.75.
AMC has fallen 55.7% in the year to date and is down 69% in the last 12 months. It has lost 19% of its value in the past five days and is down 22% in the past month. The S&P 500 SPX has lost 23% in the year to date.
The stock has had a wild ride over the past few years, shifting from a pandemic victim to a meme stock darling. According to RapidRatings, a company that assesses the finances of public and private companies, the company's financial health is a cause for concern, as AMC remains a cause bre for a vocal community of individual investors.
See Now: AMC may have been a meme-stock darling, but weakness in some key areas has put the company on shaky ground.
The filing documents for the new APEs reflect that volatility.
The prospectus says that the prospectus says that the purchasers could suffer substantial losses because of the wide fluctuations in the market prices and trading volume of our shares of Class A common stock and AMC Preferred Equity Units. If that is not clear enough, we believe that the volatility and current market prices reflect market and trading dynamics that are not necessarily related to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last. We strongly advise against investing in our AMC Preferred Equity Units unless you are prepared to incur the risk of losing all or a large portion of your investment. See now: GameStop: Cash burn, lack of profitability loom large over meme stock darling.
There is the risk of further dilution, as the AMC stock has seen significant dilution each time the company issued new shares during the peak pandemic years.
A short squeeze due to the sudden increase in demand for shares of our Class A common stock that exceeds supply and focused investor trading in anticipation of a potential short squeeze has led to extreme price volatility in shares of our Class A common stock and the price of AMC Preferred Equity Units being subject to similar dynamics and volatility.