AMC Entertainment (NYSE:AMC) stock has fallen by more than 20% during the past month. Part of this fall is attributable to general market weakness, while the other part is likely due to dilution.
Yesterday, the movie theater chain released a Form 8-K documenting a debt for equity exchange. Between Dec. 28 and Dec. 29, AMC agreed to enter into a series of privately negotiated exchange agreements. These agreements will see AMC issue 3.25 million shares in exchange for $22.5 million of aggregate principal amount in its 2026 10%/12% Cash/payment-in-kind (PIK) toggle second lien subordinated notes. These shares carried an implied value of $6.94 apiece.
In other words, AMC has agreed to buy back some of its debt by providing the debt holder with newly issued shares.
“The Company may engage in similar transactions in the future but is under no obligation to do so,” said AMC.
AMC Stock: AMC Swaps Debt for Equity
However, this recent transaction is just one of many that AMC has enacted during the past few weeks. Between Dec. 21. and Dec. 22, the company entered into a similar agreement that would see it exchange debt for 3.79 million newly issued shares. Before that, the company issued 3.34 million shares in exchange for debt on Dec. 19. Between Dec. 12 and Dec. 14, AMC also issued 4.75 million shares, while a Form 8-K filed on Dec. 12 revealed that it had issued 1.56 million shares between Nov. 27 and Dec. 7.
These debt for equity transactions come amid the company’s closing of its $350 million at-the-market (ATM) offering, which was announced on Dec. 11. The offering was completed through the sale of 48 million shares at an average per share price of $7.29. With a portion of the proceeds, AMC initiated debt repurchases and debt for equity transactions that resulted in a liabilities reduction of $62.28 million.
The good news here is that AMC is reducing its debt, which tallied in at $4.82 billion during the last reported quarter. The bad news, of course, is that shareholders are getting diluted in the process.
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.
