AMC Entertainment Holdings Inc., the world's largest theater chain, was up to a four-month high after its army of small investors embraced a new class of preferred equity the company is distributing.
After the announcement of the new units on Thursday, the stock gained 19% to $22.18 at the close of New York on Friday. AMC has had a rough few years, beginning with a pandemic-related revenue collapse in 2020 that brought the chain to the brink of bankruptcy. The company was saved by small investors who call themselves apes and gather on Reddit message boards, Twitter and YouTube to pump up the stock. They have been touting the shares since Thursday night.
One person posted on Reddit said they had pounced. I just bought ten more shares today. The market was skeptical at first about AMC's preferred equity plan. In 2021 the company tried to issue more common stock. The CEO, Adam Aron, has regrouped over the past year and realized they could issue preferred stock instead of raising capital. The company had permission to do so in 2013 before Aron was CEO, according to the shareholders.
AMC will give every common shareholder a preferred equity unit as a dividend. The units will start trading later in August, and investors can buy and sell them normally. The company can also issue new APE shares to raise money, according to an interview with Aron after the company's earnings call. It could help it pay down $10 billion in debt and lease obligations, and buy other theater chains.
As we continue to work our way through this epidemic, the new equity lessens our survival risk as we continue to work our way through it, according to Aron in a letter to shareholders.
Analyst reaction was mixed, despite the fact that many small investors liked the idea. Some expressed concern about the potential dilution of the new shares, but others said it could be an attractive way to reduce debt.
It's complicated to play 3D chess, according to Aron in a self-described tweetstorm about the dividend on Twitter. It is getting harder to be a woman in America.