AMC Entertainment (NYSE:AMC) stock is in the red after the company announced a privately negotiated exchange agreement concerning the issuance of shares in exchange for debt. AMC will provide an undisclosed party with 3.34 million newly issued shares of AMC stock in exchange for $25 million in principal amount of its 2026 10%/12% cash/payment-in-kind (PIK) toggle second lien subordinated notes.
“Based on aggregate principal amount exchanged plus $27,777 aggregate accrued interest thereon through the relevant date of exchange, the Common Stock issued had an implied value of $7.47 per share,” said AMC in a Form 8-K filing.
AMC also hinted that it may enter into additional equity for debt exchanges in the future, but is not obligated to do so.
AMC Stock: AMC to Issue 3.34 Million Shares
This news follows AMC’s closing of its $350 million at-the-market (ATM) offering earlier this month. AMC raised the capital through the sale of approximately 48 million shares. The company then used the proceeds to repurchase debt or exchange debt for equity, resulting in a liabilities reduction of $62.28 million.
“Thus far in 2023, AMC has raised $865 million of gross equity capital and lowered liabilities by approximately $440 million by reducing our corporate borrowings by approximately $350 million and repaying more than $90 million of COVID-19 related deferred rent liabilities,” said CEO Adam Aron.
Meanwhile, AMC stock has declined by more than 8% during the past month. This is likely the result of the dilutive effects of issuing new shares. With more cuts in the pie, each shareholder’s stake, or piece of the pie, gets smaller.
On a brighter note, AMC announced this morning that it would expand its presence in the “Premium Gourmet Candies” sector by offering its own line of branded chocolate candies. These include chocolate covered pretzels, almonds, raisins and peanuts. The company’s new sweets will be available in AMC theaters starting this week.
AMC had previously collaborated with “top confectioners” for over a year in order to create its chocolates. Next year, the company has plans to expand its selection of sweets.
Still, shareholders shouldn’t get too excited, as food and beverage companies have historically carried low profit margins. AMC’s branded popcorn hasn’t exactly had a significant effect on AMC stock, either.
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.
