AMC Shareholders Approve Key Measures To Raise Fresh Cash, Convert APE Units
AMC stockholders today overwhelmingly approved a pair of provisions that would dramatically enhance the company’s ability raise fresh cash by issuing and selling shares and boost the price of the company’s shares in a ten-for-one-reverse stock split.
The approval at a special meeting of shareholders help virtually would also trigger the immediate conversion of AMC Preferred Equity Units, or APEs, into common shares.
The only rub is that that the measures can’t be implemented yet since there’s a suit pending in Delaware court by an AMC shareholder seeking to block them. A judge has set an April 7 hearing date to rule on a preliminary injunction on that.
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“We will vigorously oppose claims made in Delaware Court of Chancery that we are not folowwing the will or our shareholders,” AMC CEO Adam Aron said at the meeting. “Your vote today sends a very strong signal that we are doing exactly as you wish.”
Some 80% of votes cast approved an amendment to the giant theater chain’s certificate of incorporation to increase the share authorization of common stock to 550 million shares. Some 87% of votes cast backed the 1-for-10 reverse stock split. That consolidates the number of existing shares of stock held by shareholders into fewer but more valuable shares. It doesn’t change the value of the company, just the stock price. Shares of AMC, a so-called meme stock, are extremely volatile with a range over the past 52 weeks from under $4 to over $34. It’s rare, but if a company’s shares fall and stay too low for too long they risk a potential delisting from the stock exchange.
AMC base of primarily retail, or individual, stockholders in the past hasn’t wanted the company to issue new shares since that dilutes the value of their holdings. It’s the reason Aron last year created the new publicly traded APE units, which could be issued and sold without approval. The problem is that the value of the APEs, which was supposed to track AMC stock, fell sharply, making them much less useful that hoped for as a currency. If the court allows the company to proceed, the APES would disappear.
“I would like to commend our shareholders for the wisdom exhibited in your vote by approving these proposal and doing so by such wide margins,” Aron said. “The surest way to combat naysayers and prophets of doom is to keep our cash reserves robust.”
AMC staved off bankruptcy during and after Covid and has been making some progress cleaning up its balance sheet, but it’s got a heavy debt load and is really at the mercy of the theatrical release schedule and box office. Aron has said it needs the option of raising cash as a cushion against a still uncertain market and, if it sees interesting deals, to add new theaters to its portfolio.
The APEs are up nearly 9% at $1.88 after the vote. AMC common shares are off 14.7% at $4.65, off their lows for the session.
“Should the conversion of APE units to AMC common shares be permitted to proceed—along with the increase in authorized common shares and 1-for-10 reverse stock split—we continue to see a positive path for the company to raise capital to not only reduce/eliminate balance sheet leverage but pursue other business growth opportunities,” said analyst Eric Wold of B. Riley. “While we maintain our Neutral rating and $4.50 PT until final approval is granted and the conversion occurs, we still expect the prices of APEs and AMC shares to converge from this point forward.”
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