Shares in the AMC movie theater chain have plummeted in premarket trading. As of the time of this writing, AMC shares are down over 27% to $3.83 per share. At the same time, AMC’s other type of share, the APE preferred equity shares, are surging. Here’s what you need to know.
What’s happened? AMC shares have lost nearly a quarter of their value in premarket trading, as of the time of this writing. Meanwhile, the movie theater chain’s preferred equity shares, known as APE, have surged nearly 27% in premarket after a judge on Friday approved the company’s request to convert APE shares to common shares.
What are APE shares? You can read Fast Company’s full explainer on APE here. But in short, it was a new type of stock AMC created because it could not create more AMC shares to raise additional, much-needed funds. AMC shareholders nixed the idea of AMC creating more shares because they feared their existing shares would then be diluted and thus worth less. But though shareholders could block AMC from creating more shares, they couldn’t block the company from creating a new type of share, and thus the AMC preferred equity share (APE) was born.
Why did AMC create APE? In short: to raise funds to pay off its debt. AMC has a huge pile of debt and many feared the company would have to file for bankruptcy. But as The Streetnotes, now that APE shares can be converted to common stock, bankruptcy isn’t on the table anymore.
So who is the winner in the AMC-APE battle? The company, says The Street. It gives AMC breathing room and much-needed liquidity into 2024 and perhaps 2025. And by then AMC’s revenue could finally reach pre-pandemic levels, which would put it on more solid footing than where it’s been for the past several years.