Shares of AMC (NYSE:AMC) stock are down by more than 30% today as the company’s APE (NYSE:APE) special preferred share dividend gets ready to begin trading on the New York Stock Exchange. AMC shareholders of record as of Aug. 15 will receive the units. However, anyone who purchased shares of AMC stock before today will receive the dividend.
CEO Adam Aron tweeted yesterday that APE will begin trading on the NYSE sometime this morning:
Remember, with the APE seeing its first trade on the NYSE at some time tomorrow morning, the value of your AMC investment will be the combination of your AMC shares and your new APE units. An AMC share plus a new APE unit added together — compared to just an AMC share previously.
— Adam Aron (@CEOAdam) August 21, 2022
Adding to the pressure on AMC is that movie theater competitor Cineworld (OTCMKTS:CNNWF) is preparing for possible bankruptcy. Cinemark is currently evaluating its options for additional liquidity and may restructure its balance sheet by deleveraging. The company warned that existing shareholders will likely be diluted in the process, as admissions have been weak this year.
With that in mind, let’s get into the details of the new APE dividend.
AMC Stock: 10 Things to Know About the APE Dividend
- Shares of AMC stock are falling lower today to reflect the value of the APE dividend. As Aron explained, an AMC investment is worth the combination of an AMC share and an APE unit.
- The units will be tradable on the NYSE under the “APE” ticker.
- AMC Entertainment will issue roughly 517 million APE units. A unit will be issued for each common share of AMC outstanding.
- Each unit will represent “an interest in 1/100th of a share” of preferred stock. As a result, each unit will have the same voting rights as one share of AMC common stock.
- AMC noted that the special dividend’s effect on AMC stock will “be similar to a 2/1 stock split.”
- B. Riley analyst Eric Wold believes APE and AMC will trade at “relatively equal prices” because the two classes of equity have “equal economic value and voting rights.”
- Another 4.5 billion APE units could be sold after the initial issuance, if the board approves.
- The APE units can technically be converted into AMC stock, pending a board proposition and shareholder approval. However, the company does not expect its board to propose a convertibility feature “any time soon.”
- The number of AMC common shares will not change, remaining at 516.82 million.
- CEO Adam Aron characterized today’s APE dividend news as “perhaps the single biggest action [the company] will take in all of 2022 to fundamentally strengthen AMC for the long term.”
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.