A recent statement from AMC Entertainment has provided a creative solution to issues stemming from the reluctance of investors to offer more shares, which led to no meaningful outcome last year.
On Thursday, AMC said it would distribute preferred shares as a dividend to all common shareholders. The company applied to list its preferred equity units on the New York Stock Exchange under the symbol APE, as a way of thanking the retail investors who helped save the company from bankruptcy.
The stock price of AMC plummeted roughly 6% during after-hours trading on Thursday.
AMC’s CEO, Adam Aron, released a statement today
as we reward and recognize our enthusiastic and supportive shareholders, both domestically and internationally,” CEO Adam Aron said in a statement. The AMC Preferred Equity unit will be equal to each common share of AMC that the shareholder owns. The company expects to distribute around 517 million APE units to its shareholders by the end of this month. Shares of the new company will begin trading on Aug. 22. This way, they will enjoy the same voting rights as the current common shares. AMC raised billions in profits from selling new stock during the pandemic but ran out of shares to sell. Investors, fearing dilution, rejected the company’s proposal to issue additional shares.
These Preferred Equity Units Are a Workaround, of Sorts
The preferred equity units are a workaround, of sorts, and allow AMC to sell additional units of stock as it works to recover its business. After selling the 517 million APE units, AMC will still have around 4.5 billion units that it can sell to raise funds.
creating APEs will strengthen AMC deeply and fundamentally, Aron said in a separate shareholder letter issued Thursday. “Given APEs’ flexibility, we will likely be able to raise money if we need to and so choose, which greatly reduces our survival risk as we proceed through this crisis to recovery and transformation.”
According to AMC’s second-quarter results Thursday, the company generated nearly $1.2 billion in revenue during the quarter ended June 30, but it posted a net loss of $121.6 million.