AMC Entertainment (NYSE:AMC) stock shareholders have been focused on AMC’s inclusion in the New York Stock Exchange’s Threshold Securities list following a tweet from CEO Adam Aron:
Many of you are incensed by the high number of "Fail to Deliver" AMC shares, and that AMC again has been on the Threshold List for multiple weeks. We repeatedly have gone to the NYSE and FINRA, and did so again in July, to put and keep this entire situation on their radar.
— Adam Aron (@CEOAdam) August 2, 2023
Fail to deliver (FTD) occurs when one party in a contract fails to deliver on their obligation. In the case of short sales, FTD can occur when a short seller does not own all or any of the shares at the time of settlement, also known as naked short selling. This can also result in the creation of phantom shares, which have a dilutive nature that can lower the price of a stock.
Aron also points out that AMC has been on the NYSE Threshold Securities list for multiple weeks. Inclusion on the list requires an aggregate FTD position for “five consecutive settlement days at a registered clearing agency” that totals at least 10,000 shares and 0.5% of the company’s shares outstanding.
AMC Stock: CEO Adam Aron Calls Out Threshold List Inclusion
Based on data from Fintel, AMC’s daily FTD has surpassed 10 million shares since June 27. From May 3 to June 26, AMC’s daily FTD never exceeded 10 million shares. In fact, daily FTD dipped to below 10,000 shares in late May before experiencing a significant run-up in early June. However, since June 27, AMC stock has actually appreciated by about 20%.
One might expect for AMC to have fallen since June 27 due to the high rate of FTD. However, another catalyst factors into the play here. Before Vice Chancellor Morgan Zurn ruled to block the conversion of AMC Preferred Equity Units (NYSE:APE) into AMC stock, shareholders were largely expecting for her to rule in favor of the conversion. This belief was uplifted by Special Master Corinne Elise Amato’s recommendation in favor of the conversion. A conversion would have meant dilution for AMC, which would likely lower the price. Following Zurn’s decision, AMC stock spiked higher while APE fell lower.
The short-term effects of Zurn’s decision may have been welcomed by shareholders due to the price appreciation. However, Aron warned that AMC could run out of cash by 2024 or 2025 if it is unable to raise equity capital. In the meantime, the company is awaiting a decision from the court regarding the stay of the status quo order which prevents the 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.
