AMC’s APE Units Come at a Bad Time for AMC Stock

For AMC Entertainment (AMC), the release of its new preferred stock class called APE units has come at a bad time. Competitor Regal Cinemas announced a potential bankruptcy, which caused hysteria in the movie theater industry.

As AMC stock plummets, are its APE units worth their weight? Here’s the rundown on a rival’s potential bankruptcy and how it could impact AMC in the long term.

Cineworld, the parent company of Regal Cinemas and the second-largest movie theater circuit in the world, says admission levels are poised to remain low through November of this year. This will put its liquidity in a tough spot and could spark a bankruptcy filing.

AMC CEO Adam Aron said in response to the news, “At AMC, as we have publicly disclosed previously, the film slate in the third quarter of 2022 is expected to be relatively weak. However, we continue to be quite optimistic about the increasing demand for our portfolio of movie [theaters] in the fourth quarter of 2022 and calendar year 2023.”

Despite Aron’s optimism, the news of a major industry competitor facing potential bankruptcy really spooked AMC investors. From the market open on Monday, Aug. 22 to nearly 1:00 p.m. EST, AMC stock lost 38.68 percent of its value. At that point, shares were trading at $11.05 each.

In what can be considered bad timing, AMC released its preferred stock class, called APE units, on Aug. 22. Some investors received APE units in the form of a dividend payout prior to the preferred class actually beginning to trade. Now, the class has officially begun trading, but it won’t be seeing immediate success due to the stock’s current volatility.

AMC’s preferred equity dividend, aka APE, has been automatically distributed to existing shareholders. According to Public.com, “All [AMC] positions purchased before market close on Aug. 19 will be eligible to receive the [APE] dividend. [APE] dividends will be issued at close of trading on Friday, Aug. 19."

Investors may be able to convert APE into common stock in the future, though that can only happen if “the company proposes and shareholders (including APE holders) vote to approve the authorization of additional common shares at a future AMC Entertainment stockholders’ meeting,” according to Aron.

Aron wrote in a tweet the company’s new APE units will allow it to “raise capital, pay debt,” and more. That could potentially be enough to keep it afloat while competitors tease bankruptcy.

AMC has been in meme stock territory since the era began at the start of 2021. Its value has plummeted -70.32 percent in the 12 months ending on Aug. 22.

In short, AMC remains a speculative bet that holds a lot of risks. The company is stretching its efforts to last in a troubled industry, which could be to its advantage in the long run. However, retail investors still remain at risk during the process.