No, shares of AMC Entertainment (NASDAQ:AMC) stock are not up by over 600% today, despite what some price charts on financial websites are showing. Instead, today is the first day that AMC stock is trading on a 1-for-10 reverse stock split basis. The reverse split increased AMC’s price by a factor of 10 while reducing the number of shares by the same factor. Effective today, the movie theater chain has also increased its authorized shares to 550 million from 524.17 million.
Combined, these two moves will allow for the conversion of AMC Preferred Equity Units (NYSE:APE) to AMC stock. AMC expects APE to cease trading tomorrow, Aug. 25, which will then be followed by its delisting from the New York Stock Exchange.
AMC Stock Begins Trading on a 1-for-10 Reverse Split Adjusted Basis
Based on 995.40 million shares of APE outstanding as of June 30, a total of 99.54 million shares of AMC stock will be issued as part of the APE conversion. Today is also the day that AMC made its litigation settlement payment for eligible recipients. As of Aug. 24 — and accounting for the reverse split — the recipients will receive one share of AMC for every 7.5 shares owned. AMC expects to issue 6.92 million shares as part of the litigation payment. Following the completion of the reverse split, litigation settlement and conversion, AMC expects there to be 158.38 million shares outstanding.
Shareholders aren’t too pleased with the news, as AMC stock has declined by more than 70% this month while APE has fallen by about 25% during the same time range. Still, Wedbush upgraded AMC to “neutral” from “underperform” this morning and raised its price target to $19 from $2. Adjusting for the reverse split, that actually means that Wedbush lowered its price target by $1.
“We think AMC is well-positioned against an improving industry backdrop,” said Wedbush analyst Alicia Reese. “We expect 2023 North American box office to end up 20% over 2022, or ~78% of 2019 box office, with AMC at least maintaining its 22% market share if not expanding with its vast network of premium large format screens.”
Reese added that the resolution of AMC’s litigation has removed a major overhang from the company. She also expects improvement in the European box office over time as AMC works to better its theater experience.
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.
