AMC Entertainment's New APE Stock
Minutes after its debut on Monday, trading in AMC Entertainment's (AMC) new preferred dividend, ticker symbol APE, was halted and the stock dropped more than 20% from its opening price.
After opening at $6.95, trading in the new shares, which AMC is calling "preferred equity units" and which "are designed to have the same economic value and voting rights as a share of common stock
If the APE units trade as planned, they will have the same effect as a stock split, giving each common shareholder an equity stake in the parent company equal to the number of shares of AMC stock own
However, the possibility of their conversion could dilute the outstanding value of AMC shares, adding to the downward pressure in early Monday trading if AMC shareholders approve the board's
As such, "an investor should therefore expect that the price of a stand-alone share of common stock logically should at least initially decline,"
AMC explained in a statement accompanying the issuance of the preferred shares.
On Monday at the close of trading, AMC stock had dropped 41.5% to $10.54. The last reported price of $5.50 per share for APE stock signified a 21% drop from the previous close.
If you compare that to the Friday closing price of $18.01 for the individual AMC shares, you get an estimated value of $16.04 per share for the portfolio as a whole.
The news that AMC's biggest competitor, Cineworld, has confirmed it is considering a Chapter 11 bankruptcy filing in the United States
and the fact that the stand-alone commons shares are effectively trading ex-dividend from the APE distribution, all weighed on AMC stock.
The statement went on to say that "Cineworld is in discussions with many of its major stakeholders," which included the company's "secured lenders" and "their legal and financial advisers."
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