The AMC Entertainment Holdings Inc (NYSE: AMC) share price has fallen over 72.4% in the past month amid several recent developments that led to converting its preferred shares, also known as APEs, into ordinary ones. This was after a court ruling in favour of a settlement presented by the firm to end a lengthy litigation journey.
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The conversion of APE preferred shares into AMc common shares occurred on Friday, August 25, 2023, a day after the company conducted a 1-for-10 reverse stock split to boost its share price ahead of the conversion. However, the company is expected to sell even more shares in future.
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A group of preferred shareholders have filed a petition with the courts to be awarded the same shares worth $129 million as the existing common shareholders were awarded during the settlement. The petition is yet to be heard, but AMC can sell another 390 million shares to raise much-needed funds.
The movie theatre operator got lucky during the meme stock mania of 2021 when retail investors bid up its share price to very high levels to bankrupt short-sellers who were betting on the company’s stock going down to zero. The move worked, allowing the company to issue new preferred shares known as APEs as a nod to the retail investors.
However, according to its CEO, Adam Aron, AMC is facing severe liquidity issues and needs to raise more money by selling shares to avoid filing for bankruptcy. However, the company has a massive $9.5 billion debt pile with no clear path to repaying the debt.
AMC will likely have to file for Chapter 11 bankruptcy protection to restructure its debt and release most of it like its rival Cineworld did. Cineworld recently emerged from the bankruptcy process as a private company as retail investors were wiped out, which could also happen to AMC investors.
APE shares stopped trading on Friday after converting to AMC common shares, marking the end for shares regarded as representative of the meme stock mania. Given the looming threat of bankruptcy, I will closely monitor what happens with AMC shares going forward.
AMC stock price.
The AMC Stock price fell 7.32% premarket, adding up its monthly decline of 72.43%.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.