AMC Entertainment Holdings Inc. (NASDAQ: APE), the American cinema chain company is currently facing a hitch in its financing. Its preferred stocks, which it paid off as a special dividend has taken their own route. It is completely distinct from that of its ordinary stock class.
A Recap of Events Concerning APE Stock
AMC Entertainment dropped quite the bombshell to its shareholders earlier this morning, announcing a capital raise, a debt exchange, along with a possible shareholder vote on preferred stock conversion into ordinary stocks. As the company raised 91 million preferred APE share units to sell to Antara Capital LP, it has exchanged its debt as a result. Now the bizarre outcome of this deed is a significant price discrepancy between APE’s ordinary and preferred stock class, despite them effectively being economically identical securities. AMC ordinary shares have plunged and then taken off, drastically with the announcement, whereas APE preference shares have climbed by over 75% in a single day.
AMC Shareholders to Vote on Conversion
Perhaps the most consequential news that AMC Entertainment shareholders face is the upcoming shareholder vote. This will concern the decision to convert APE preference shares into ordinary AMC stock. The severe price discrepancy despite their economically identical roles complicates the matter. It would make sense to vote against the move, however, according to the company’s recent 8K filings, another dimension becomes evident. Although APE was issued on a 1:1 ratio with AMC, it has raised an additional 375 million units for its debt exchange and capital raise. If both classes of security stabilize at a convergence point, the conversion would make the most economic sense to shareholders.
APE preference stock is presently facing a bizarre value discrepancy against ordinary AMC stock. This is resulting in technical complications in the stock market. Due to this, the preferred APE shares have taken off phenomenally, coinciding with a plunge in AMC’s ordinary stock.