AMC Stock Fell 22.8% on a Proposal To Convert APEs Into Shares

The AMC Entertainment Holdings Inc (NYSE: AMC) stock price plunged 22.84% after announcing plans to raise $110 million via the sale of APE units to Antara Capital. The deal will be completed in two tranches at an average price of 66c per share.

AMC noted that the price offered to the new investors represented a slight discount to the closing price of its APE shares on the NYSE on December 21, of 68.5c. The movie theatre chain also revealed that Antara Capital would convert $100 million of its existing AMC lien notes due 2026 into about 91 million APE units.

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The debt conversion will automatically reduce AMC’s debt burden by $100 million, which is impressive. The move will also reduce AMC’s annual interest payments by $10 million, creating more value for the firm and its shareholders. 

The first tranche of the translation will see Antara purchase 60 million APE units via AMC’s at-the-market program. In comparison, the second tranche involves the purchase of about 106.6 million APE units and the $100 million debt exchange. 

The completion of the second tranche transaction is subject to the waiting period stipulated in Hart-Scott-Rodino. 

Furthermore, AMC Entertainment plans to hold a special meeting for its common shareholders and APE holders to vote on increasing the number of authorised AMC common shares and allow for converting APE units into AMC common stock. 

AMC also wants its shareholders to approve a 1:10 reverse stock split to boost its share price. The company also wants permission to increase its authorised ordinary share capital to issue additional common shares instead of being limited to issuing APEs. 

AMC’s CEO noted that APEs had helped the company raise $272 million in additional cash in the last 90 days, which has helped deleverage its balance sheet and explore new M&A opportunities. 

However, he pointed out the significant discount at which the APEs trade, which motivated the company to simplify its capital structure by converting the APEs into ordinary shares.

*This is not investment advice. 

AMC Entertainment stock price chart.

The AMC Entertainment stock plunged  22.8% to trade at $4.02, from Wednesday’s closing price of $5.30.