AMC Entertainment (NYSE:AMC) stock fell 2% on June 29 as a hearing began over the fate of its APE (NYSE:APE) preferred shares.
The stock has been extremely volatile over the last week. It rose 10% on June 28 and has given back less than half that gain.
A Delaware Court of Chancery is being asked to approve a legal settlement to convert APE shares into common stock. Investors who bought shares during its 2021 “meme stock” heyday allege the company rigged a shareholder vote approving the move.
AMC was trading at midday on June 29 at $4.23 per share, a market capitalization of $4.1 billion. APE shares were trading at $1.72, valuing the company at just $3.7 billion.
Ticket to Survival
AMC CEO Adam Aron has been fighting to save the country’s largest chain of movie theaters since the Covid-19 pandemic forced theaters to close in 2020. One way he did it was by encouraging the 2021 move against short sellers. He called his stock’s buyers “APEs” and eventually created the new shares when he ran up against outstanding share limits.
Turning the preferred stock into a common one will dilute the control of common stockholders.
The largest buyer of the APE shares, Antara Capital, has been selling off its stake over the last four months. This has sent APE’s price down 44%, against a 28% fall for the common. A recent 13D filing shows Antara holding just 9.9% of APE, down from 28.7% in February.
While AMC has outlasted rivals like Regal Cinemas, which filed for bankruptcy last year, it is still losing money. AMC expects revenue of $4.6 billion, still below its pre-pandemic take, despite Aron’s efforts to boost sales by selling non-fungible tokens (NFTs) and popcorn through Walmart (NYSE:WMT).
The company now has less than a half-billion in cash, having lost $523 million in the last year. Long-term debt is $4.7 billion.
AMC Stock: What Happens Now?
AMC’s failure would hurt more than its shareholders. Comcast’s (NASDAQ:CMCSA) Universal, Sony’s (NYSE:SONY) Sony Pictures (formerly Columbia), Paramount Global’s (NASDAQ:PARA) Paramount, Warner Bros. Discovery’s (NYSE:WBD) Warner Brothers studio and Walt Disney (NYSE:DIS) all depend on AMC theaters for their box office receipts.
Lastly, there’s also the effect of the ongoing writer’s strike. The reduced take from streaming is a major factor behind the current strike.
As of this writing, Dana Blankenhorn 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.
