All eyes are on AMC Entertainment (NYSE:AMC) stock this morning, as the AMC Preferred Equity Units (NYSE:APE) to AMC stock conversion will take place today. In a U.S. Securities and Exchange Commission (SEC) filing, the New York Stock Exchange notified the SEC that APE was suspended from trading, effective today before the market open. Afterwards, APE will be completely taken off the NYSE at the opening of business on Sept. 5.
Earlier this week, AMC conducted a 1-for-10 reverse split and increased its authorized shares to to 550 million from 524.17 million. These two actions will allow for the conversion to go through. Shareholders aren’t responding favorably, however, as AMC stock has fallen by over 60% this week.
AMC Stock: The APE Conversion Plan Takes Effect Today
As part of the conversion, shareholders of APE will receive 0.1 shares of AMC for each unit of APE owned. AMC previously stated that it would issue 99.54 million shares as part of the conversion, which is based on 995.40 million units of APE outstanding as of June 30. The company has also filed to issue 6.91 million shares as part of its litigation settlement payment, which received approval from Delaware’s Court of Chancery on Aug. 11. These shares are expected to be delivered on or about Aug. 28, of which AMC will not receive any cash proceeds. Following completion of the reverse split, conversion and settlement payment, AMC expects to have 158.38 million shares of common stock outstanding.
Yesterday, Wedbush raised its AMC price target to $19 from $2 and upgraded shares to “neutral” from “underperform.” On a reverse split-adjusted basis of the prior price target, that means that Wedbush actually dropped its target by $1. However, the investment firm still seems optimistic about AMC’s potential in light of the conversion:
“We think AMC is well-positioned against an improving industry backdrop. 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,” said Wedbush analyst Alicia Reese.
Last month, AMC had its best admissions-revenue week since its inception over 100 years ago. However, this achievement was largely cast aside due to the impending conversion.
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.
