Tag: AMC

AMC Converting APEs and Reverse Splitting

Posted on by phoffman@channelchek.com

AMC Theatres APE Units Will Cease to Exist After Thursday

The last day of trading for AMC Entertainment (AMC) Preferred Equity Units (APE) is Thursday, August 24th. The dividend shares that were provided 1:1 for AMC shareholders one year ago, will be converted to AMC common stock, which will then be the only class of stock AMC Entertainment has outstanding. But the company still has mounds of debt, which is part of the reason for rolling the preferreds into common shares. The move doubles the number of common shares outstanding, which the company then has plans to address.

On August 11, the wild ride shareholders had been on got a bit wilder as a Delaware Court judge gave the green light to AMC proceeding with a revised plan to convert its preferred shares. This drove up shares of APE units and down the price of AMC common stock.

Month to date, APE units, which will not be trading by the end of the week, are up nearly 15% while AMC common stock is down over 37%. Since the court notice, volume has been significantly higher in both preferred and common.

Source: Koyfin

The single AMC common share class is part of the movie theater chain’s recovery from the pandemic era debt built up. AMC is also planning a reverse 1-for-10 split of its common stock and an increase in its authorized common shares.

In Form 8-K filed with the SEC last week, AMC explained that the reverse stock split is expected to also occur on Aug. 24. The market will open on August 25th with the conversion complete, and the ticker APE delisted from the New York Stock Exchange.

Expectations of the stock-conversion is that AMC will be more resilient and will eliminate capital-raising inefficiencies of APE units trading at a significant discount to AMC shares, said CEO Adam Aron.  

Analysts expect the shares to converge around the $3 price range.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://public.com/learn/ape-stock-amc-dividend#:~:text=%24APE%20is%20a%20new%20class,22.

https://courts.delaware.gov/Opinions/Download.aspx?id=351520

AMC and APE Shareholder’s Bumpy Ride to Continue

Posted on by phoffman@channelchek.com

Adam Aron Explains the Reasons Share Conversion and Issuance is Good for APE Shares

Meme stocks are getting attention again as the movie Dumb Money is set for release in late September, GameStop (GME) is implementing a strategy to use its stores as fulfillment centers, and AMC Theatres (AMC) has a court ruling on its APE shares that has added significant volatility, including a 67% upward spike after hours on Friday July 21. The AMC story is involved and likely to cause wide swings until resolved as investors wrestle with guessing what a new ruling means for the company’s financial strength, and whether the judge’s decision could be overturned on appeal or through shareholder approval.

Source: Koyfin

The main source of the ongoing dramatic moves in AMC stems from its proposed APE shares conversion. These preferred shares were provided as a dividend with a 1:1 conversion feature. If/when converted to regular AMC shares, they will dilute the regular shares. When issued, APE shares were considered a brilliant financing mechanism and method to determine if any fraudulent units were used to create a naked short.

In late July a judge blocked the proposed settlement on AMC Entertainment Holdings stock conversion plan that would also allow the company to issue more shares. The stock had been depressed in anticipation of the additional shares that would have been created. With the thought that additional shares won’t be entering the market, common shares (AMC) soared, and preferred shares (plummeted).

The Delaware chief judge Morgan Zurn said in her ruling that she cannot approve the deal, which would provide AMC common stockholders with shares worth an estimated $129 million.  The company was sued in February for allegedly rigging a shareholder vote that would allow the entertainment company to convert preferred stock to common stock and issue hundreds of millions of new shares. The investors who sued alleged AMC had enacted the plan to circumvent the will of common stock holders who opposed the company diluting their holdings.

Without the proposed settlement, common stockholders and preferred shareholders would end up owning 34.28% and 65.72% of AMC, respectively. Under the ruling, common stockholders and preferred shareholders would own 37.15% and 62.85%, respectively.

Judge Zurn wrote that while the deal would compensate common stockholders for the dilution, they had no right to settle potential claims by holders of preferred stock in this way. The settlement received more than 2,800 objections from shareholders, a level of interest Zurn called “unprecedented.” She said “AMC’s stockholder base is extraordinary,” adding many “care passionately about their stock ownership and the company.”

But what appears short term to be good for common shares, may actually weaken the financial position of the company over time according to AMC’s chairman. In an open letter, AMC chairman Adam Aron wrote, “What may not be clear to AMC’s shareholders is that if the company is unable to convert APE shares, AMC will be forced to issue significantly more APE shares to cover its upcoming cash requirements.”

Aron explained AMC is burning cash at an unsustainable rate and warned that an inability to raise capital could force the company into bankruptcy. Selling more shares would enable it to pay down some of its $5.1 billion in debt. These financial matters are further complicated by the writers and actors strike which according to Aron could delay the release of movies currently scheduled for 2024 and 2025.

Paul Hoffman

Managing Editor, Channelchek

Sources:

https://twitter.com/CEOAdam/status/1683215965608189954/photo/1

https://www.reuters.com/legal/delaware-judge-will-not-immediately-approve-amc-shareholder-settlement-2023-07-21/

https://courts.delaware.gov/Opinions/Download.aspx?id=346020

https://news.bloomberglaw.com/securities-law/amc-revises-stock-conversion-settlement-plan-rejected-by-judge

Strange Price Movement for AMC and APE – Here’s Why

Posted on by phoffman@channelchek.com
Image: AMC Theatre W. Palm Beach, Fl

AMC and APE Now Have a Most Unusual Combined Stock Chart

AMC Entertainment (AMC – common) took a big hit on Tuesday (April 4), shaving over 20% off its per-share price. At the same time its preferred shares (APE) climbed over 10% as the so-called meme-stock movie-theater company announced it reached a settlement with shareholders over its planned stock conversion. The settlement with the group of mostly institutional shareholders allows management to complete its plan to convert its AMC preferred equity, or APE, units into shares of AMC common stock.

Where are the Arbitrageurs?

After the announcement that the case had been settled, AMC stock dropped, and simultaneously APE units rose to. Arbitrage opportunities may still exist for those that expect the price of the two share types to converge as the conversion moves even closer to reality with final approval still needed.

APE units began trading in August 2022 after management announced a unique dividend that paid each AMC shareholder one APE unit for every common share they owned. The APE shares eventually experienced the market pricing them at a steep discount to the AMC common shares.

The Complaint

At issue in the litigation was the claim that shares would be diluted without offsetting compensation to existing shareholders. It was initiated by a group of mostly large shareholders (think pension funds). The terms of the settlement, announced in a filing by AMC late Monday, will allow common stockholders to receive one share for every 7.5 shares held after the reverse stock split. The payment would represent around 4.4% of AMC’s stock, or 6.9 million shares.

Source: Koyfin

“The settlement provides investors with additional shares in satisfaction of their voting claims, while allowing the company to move forward with its plan to pay down its debt,” plaintiff lawyers from Bernstein Litowitz Berger & Grossmann, Grant & Eisenhofer, Fields Kupka & Shukurov, and Saxena White said in a joint statement.

Management’s Goal

As of the end of 2022, the company owed $4.9 billion in debt. The settlement may allow the company to raise in excess of this amount which could go a long way in helping management reach its goal of ridding itself of debt.

A Word on Price Discrepancy

Arbitrage can occur when the price of preferred units is lower than the price of common shares, even though the ownership level is substantially similar, or if the dividend rate on the preferred units is higher. In these scenarios, an investor can buy the preferred units and sell the common shares short (i.e., borrow the shares and sell them with the hope of buying them back at a lower price in the future), thus profiting from the difference in prices.

As the price movement in the chart above shows, related arb. opportunity pre-announcement are likely to have paid well.

Arbitrage can also occur when the price of common shares is lower than the price of preferred units, even though the shares should trade in parity or the dividend rate on the preferred units is lower. In this scenario, an investor can buy the common shares, sell the preferred units short, and receive a higher return on investment by benefiting from the price difference.

There is not yet “final approval” on AMC’s next step. However, the shares and reverse split are shareholder approved and the settlement clears the way for the final board decision.

Paul Hoffman

Managing Editor, Channelchek

Grab Your Popcorn, AMC ‘APE’ Conversion Gets Shareholder Vote

Posted on by phoffman@channelchek.com
Image Credit: CNBC (YouTube)

Will Adam Aron CEO of AMC Win the Long Awaited Battle?

Management of AMC Entertainment Holdings ($AMC) is holding the long-awaited special meeting at noon Eastern time, Tuesday, March 14. At this meeting, shareholders will vote the peculiar $APE shares that were paid out as a dividend to shareholders. The dividend shares that were announced with the message “Today we Pounce” from the CEO Adam Aron created quite a stir – they seemed to have been designed to root out fraudulent shares and challenge any naked shorts of the AMC common shares.

The shareholders’ opportunity is a decision of whether or not to increase the firm’s stock authorization and convert AMC Preferred Equity Units (ticker: APE) into AMC common shares ($AMC). It will also vote on a 10-for-1 reverse stock split that would only take place if the APE measure passes.

AMC management won an endorsement from the proxy firm Institutional Shareholder Services (ISS) for the reverse stock split and preferred stock conversion. Institutional Shareholder Services is a market intelligence and influence proxy voting firm, its endorsement increases the odds of management having their wish.

If approved, it would represent an important career win for AMC’s Aron, who has become a superhero of sorts to the meme stock investors that helped the firm through the pandemic. He has shown himself to be able to stay one step ahead of those that would profit if AMC stock falters. Some stockholders supporting the measure take this as a fight between weak and strong and good and evil where prevailing is the only option.

 In 2020 AMC Theatres lost $4.6 billion in sales due to Covid-related lockdowns and low attendance. Some powerful investors had shorted shares, many small investors grouped together and purchased the stock in droves, this created unexpected problems for the institutional short sellers that had large trades betting against AMC’s survival.

These investors caused the stock price to increase which allowed AMC to raise cash and survive and thrive.

The APE units, which represent one hundredth of a preferred share, have the same voting power of common shares.

Not all AMC shareholders are as supportive. Some are suing the company, arguing the APE sales decimated the voting power of common shareholders who might oppose increasing the firm’s share authorization.

Aron said during the fourth-quarter earnings call that if the vote falls short, the company could be forced to sell more APE shares at lower prices than a combined AMC share. On the same call he credited selling stock with helping the firm survive the lockdowns.

“We wouldn’t be blocked from raising capital, but we’d be raising capital on much less attractive terms,” Aron said. “It would cost more dilution to the stock that is entirely 100% preventable if a majority of our shareholders vote yes.”

The company has provided this link for livestreaming the March 14 meeting.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.sec.gov/Archives/edgar/data/1411579/000110465922092397/tm2223780d1_ex99-1.htm

https://variety.com/2021/film/news/amc-theatres-4-6-billion-loss-covid-1234927642/

https://investor.amctheatres.com/corporate-overview/default.aspx

https://www.barrons.com/articles/amc-ape-stock-price-shareholder-meeting-f412434d

EUREKA! AMC’s Large Stake in Gold Mining Company May Pay Off

Posted on by cpatches
Image Credit: AMC Theaters

AMC Diversified into Mining Last Winter – The Prospects Look Good

They should make a movie about the CEO of AMC Theaters, Adam Aron. But they ought to wait because it seems his story and that of AMC Theaters ($AMC) have a few more plot twists left. Yesterday AMC Shareholders struck gold. That is, the 22% of a gold mining operation in Nevada that AMC purchased in March returned extremely positive results as to the amount and quality of the yellow metal found in recent tests.

Let’s Rewind

In mid-March of this year AMC Theaters, coupled with Natural Resources Guru Eric Sprott, had taken a large stake in a gold and silver mining company. The company, Hycroft Mining Holdings ($HYMC), has a 71,000-acre gold mine in Northern Nevada. AMC’s stake was 22%. It invested $27.9 million in cash in Hycroft in exchange for 23.4 million warrant units, with each unit consisting of one common share of Hycroft and one common share purchase warrant. The units were priced at $1.193 a share, while each purchase warrant was priced at about $1.07 and carried a five-year term. HYMC had been trading in the $0.30 to $0.33 range when the deal was executed, as of September 14, the mining company was trading for $0.84 per share. AMC also was granted the right to appoint someone to Hycroft’s board.

Eric Sprott’s investment was made through a holding company for Sprott, not the alternative investment manager owned by Mr. Sprott, Sprott Inc. The holding company will make an equal investment in Hycroft with the same terms. Together, AMC and Sprott invested $56 million in the mining company.

So Far, So Good

The large stake taken by a completely unrelated business was ridiculed by many. One Seeking Alpha author called it a “Horror Story.” But the run-up in AMC’s stock from the short-squeeze in 2021 and its foresight to set aside capital for growth and diversification may have been smart. As of yesterday, the 22% stake in the uncorrelated business (Leisure vs Natural Resources) makes the CEO presiding over the popular meme-stock look like a hero.

According to a press release from Hycroft Mining, initial drill results from the test they conducted in different areas of the the property more than confirmed their expectations.

Alex Davidson, Vice President, Exploration at Hycroft commented, “These initial drill results confirm the higher-grade opportunities identified in the 2021 drill program. While we have only just begun investigating the planned targets of our 2022-23 drill program, these results are very encouraging and further confirm the importance of additional drilling to explore the untapped potential of the Hycroft deposit. Importantly, we are observing the high-grade zones are more continuous than previously interpreted in addition to seeing silver and gold grades significantly higher than the average grade at the Hycroft deposit.”

Adam Aron tweeted dramatically yesterday after the results were made public, exclaiming, “Eureka, In Hycroft’s early efforts, the biggest exploration program there in a decade, they found it! There’s MORE gold in them thar hills. And MORE silver. And it’s MUCH higher grade than previously known at the site. To my critics in the cheap seats: #AFeast of CrowStewForYou.

Take Away

The AMC story, so far this decade, is full of so many plot twists and unexpected events that it confounds even the most veteran market watchers.

High-level research and analysis for many natural resource producers is regularly posted on Channelchek, along with information on stocks within the leisure sector. Watch for continued updates on this story by signing up for Channelchek emails.

Paul Hoffman Managing Editor, Channelchek

Sources

https://twitter.com/CEOAdam/status/1569665358130475008

https://hycroftmining.com/_resources/news/Sept-13-2022-Initial-Drill-Results.pdf

https://seekingalpha.com/article/4499787-amc-stock-investing-hycroft-mining-horror-movie?